Taxable Income: What It Is and How to Calculate It

It's important to know which income is taxable to file accurate returns and reduce overall tax liability.

Twenty dollar bills on an IRS 1040 tax form
(Image credit: Getty Images)

Knowing your taxable income (the amount of your income subject to federal tax that you must report on your federal tax return) is important for several reasons. The IRS requires that you report all taxable income and file an accurate tax return. Also, understanding taxable income can help you figure out how much tax you will owe, if any, and might help lower your tax bill

The most common taxable income for many people is earned income (e.g., from wages, tips, bonuses, etc.). However, some people are surprised that income from unemployment, Social Security, and other retirement benefits can also be taxable.

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Katelyn Washington
Former Tax Writer

Katelyn has more than 6 years of experience working in tax and finance. While she specialized in tax content while working at Kiplinger from 2023 to 2024, Katelyn has also written for digital publications on topics including insurance, retirement, and financial planning and had financial advice commissioned by national print publications. She believes knowledge is the key to success and enjoys providing content that educates and informs.