Definition
The income your tax brackets actually apply to: gross income minus adjustments (giving AGI), minus the standard deduction or itemized deductions. It is almost always meaningfully lower than your salary.
Why it matters
Confusing salary with taxable income makes every tax estimate too scary and every deduction misunderstood. Pre-tax contributions and deductions work precisely by shrinking this number before the brackets touch it.
Example
A worker grossing $80,000 contributes $5,000 pre-tax to a 401(k) and takes the standard deduction. The brackets apply to a figure tens of thousands below $80,000, which is why their real tax bill is far smaller than a naive salary-times-bracket guess.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.