Is taxable income the same as take-home pay?

No. Take-home pay is what lands in your bank account after taxes and benefits are withheld. Taxable income is the figure used to calculate how much tax you owe in the first place. Your take-home pay is the result of the tax calculation, not the starting point.

Does a 401(k) reduce taxable income?

Yes! Contributions to a traditional 401(k) are made pre-tax, meaning they lower your Gross Income before it even becomes AGI. This lowers your taxable income dollar-for-dollar. Roth 401(k) contributions, however, are made with after-tax dollars and do not lower your current taxable income.

Can I deduct credit card interest?

No. Personal interest, such as interest on credit cards, car loans, or personal loans, is not deductible. Only specific types of interest, like mortgage interest (on up to $750k of debt) and student loan interest (up to $2,500 adjustment), can reduce your taxable income.

What is the SALT cap?

The SALT (State and Local Tax) deduction allows you to deduct state income taxes and property taxes. However, the Tax Cuts and Jobs Act of 2017 capped this deduction at $10,000 per year ($5,000 for married filing separately). This cap applies regardless of how high your actual state taxes are.

Taxable Income Calculator — Standard vs Itemized Math

Taxable Income Calculator - Standard vs Itemized Deductions

What Is Taxable Income?

Taxable income is the portion of your gross income that the IRS actually taxes. It is almost always lower than your total salary because of deductions and adjustments. Understanding how to calculate it is the key to lowering your tax bill.

The formula is simple but powerful:

Gross Income - Adjustments (Above-the-line) = AGI
AGI - Greater of (Standard or Itemized Deduction) = Taxable Income

Our Taxable Income Calculator does this math for you, comparing the Standard Deduction against your potential Itemized Deductions to ensure you take the path that saves you the most money.

Gross Income vs. AGI vs. Taxable Income

Many taxpayers confuse these three terms. Here is the breakdown:

Gross Income: This is everything you earn before taxes—wages, dividends, interest, and business income.
Adjusted Gross Income (AGI): This is your Gross Income minus specific "above-the-line" adjustments like 401(k) contributions, student loan interest, and HSA contributions. Your AGI determines your eligibility for many tax credits.
Taxable Income: This is your AGI minus either the Standard Deduction or your Itemized Deductions. This is the final number the IRS uses to calculate your tax bill.

Standard Deduction vs. Itemized Deductions

The biggest decision you will make when filing is whether to take the Standard Deduction or Itemize. You cannot do both. The IRS allows you to choose whichever one lowers your taxable income the most.

The Standard Deduction (2024 & 2025)

The Standard Deduction is a flat amount that reduces your taxable income, no questions asked. It is adjusted annually for inflation. See the IRS Topic No. 551 Standard Deduction for more details.

Filing Status	2024 Amount	2025 Amount (Projected)
Single	$14,600	$15,000
Married Filing Jointly	$29,200	$30,000
Head of Household	$21,900	$22,500

For most people (about 90% of taxpayers), the Standard Deduction is the better choice because it is high enough to exceed their potential itemized expenses.

Itemized Deductions

Itemizing means listing out specific eligible expenses. You should only itemize if your total eligible expenses are greater than your Standard Deduction. For a full list, refer to IRS Schedule A (Form 1040). Common itemized deductions include:

State and Local Taxes (SALT): Deduct state income tax (or sales tax) and property taxes, up to a cap of $10,000 per year ($5,000 if married filing separately).
Mortgage Interest: Deduct interest on the first $750,000 of mortgage debt ($375,000 if married filing separately).
Charitable Contributions: Deduct donations to qualified non-profit organizations.
Medical Expenses: Only the portion of unreimbursed medical expenses that exceeds 7.5% of your AGI is deductible.

Strategies to Lower Your Taxable Income

Reducing your taxable income is the most effective way to pay less tax. Here are three proven strategies:

1. Max Out "Above-the-Line" Deductions

Contributions to a traditional 401(k) or HSA lower your AGI directly. This is powerful because a lower AGI can help you qualify for other tax breaks that have income limits.

2. Bunch Your Deductions

If you are close to the itemizing threshold, try "bunching" two years of charitable donations or medical procedures into a single tax year to push your total over the Standard Deduction limit.

Common Mistakes to Avoid

Double Dipping

You cannot take the Standard Deduction AND itemize. It is an either/or choice. Our calculator helps you decide which is better.

Forgetting State Taxes

Even if you take the Federal Standard Deduction, some states allow you to itemize on your state return. Check your local tax laws.

Frequently Asked Questions

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Now that you know your taxable income, use our other tools to estimate your refund or fine-tune your paycheck.

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Taxable Income Calculator — Standard vs Itemized Math