Taxable income is the amount of income the government can actually tax you on. It is not your total earnings — it is what remains after subtracting allowable deductions and exemptions.
For example, if you earn $80,000 per year and have $15,000 in deductions, your taxable income is $65,000. You only pay taxes on that amount.
For businesses, taxable income is calculated by subtracting operating expenses, depreciation, and other allowable costs from total revenue. Understanding this is essential for tax planning.