Taxable income can be termed as the amount on which an income tax is applicable for any taxpayer. The procedure for determining the taxable income of any particular taxpayer is to firstly calculate the gross income and tax deductions that are allowed and then subtract the deductions from the gross income amount.
Income tax is imposed on any citizen, resident or non-resident, business entity and other organizations under the income tax policies adopted by the Federal government. In order to determine a particular amount of tax which must be paid, tax rates and tax brackets have been defined by the law.
People in United States are liable to pay a part of their income to federal, state or local governments as an income tax. The calculation of the income tax depends upon the taxable income slabs and the rate of interest for every slab which is pre-defined according to the tax laws.