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Explain the differences between taxable income and adjusted gross income.  

Explain the differences between taxable income and adjusted gross income.  

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The taxable income is the amount of income subject to income tax. The actual taxes are calculated from the taxable income. It is calculated by deducting personal exemptions and itemized deductions from adjusted gross income.

Adjusted gross income is the total of individual’s total gross income less specific deductions. The adjusted gross income is more appropriate than the gross income.

The taxable income is generally lower than the AGI because few amounts are not subject to tax.

The adjusted gross income includes certain amount which is exempt from the income tax.

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