Which of the following best describes taxable income?

Taxable income is best described as the income after accounting for all tax deductions. This definition is crucial because taxable income represents the amount on which tax liability is calculated. It takes into account the total income earned by the taxpayer and subtracts any deductions or allowances that the tax regulations permit, resulting in the figure that is subjected to taxation.

While total income is an important concept, it does not necessarily account for the specific deductions that an individual may qualify for under tax law, which can significantly reduce the amount of income that is ultimately taxable. Understanding the distinction between gross income and taxable income is essential for accurate tax compliance and planning.

This understanding further clarifies the inadequacy of the other choices. Income before any deductions does not reflect the amount that will actually be taxed. Any received income may include non-taxable elements or those that could be exempt, making it too broad to define taxable income accurately. Income solely from employment restricts the definition to one source, whereas taxable income can include various forms of earnings such as dividends, capital gains, and rental income. Such nuances highlight the precision with which taxable income should be defined and calculated.