General tax and payroll information. Confirm specifics with a CPA or EA. Data verified April 2026.
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Gross Income vs Taxable Income: Where the Deductions Come Off

Gross income, AGI, taxable income, and net income are four different numbers all loosely called “income.” Only taxable income (Form 1040 Line 15) has tax brackets applied to it. Here is the exact cascade with 2026 figures.

The Four Income Numbers Everyone Confuses

Gross Income

1040 Schedule B/C/D/E source docs

Everything you earned

W-2 wages + 1099 income + K-1 + interest + dividends + capital gains + rental income + any other source. Everything before anything is subtracted.

AGI (Adjusted Gross Income)

1040 Line 11

Gross minus above-the-line adjustments

Gross income minus IRA, HSA, student loan interest, half of SE tax, educator expenses, etc. Used by most phase-outs.

Taxable Income

1040 Line 15

AGI minus standard or itemised deduction

The number your tax brackets are applied to. Subtract the standard deduction (~$15,000 single 2026) and any QBI deduction from AGI.

Net Income (Take-Home)

Paystub net column

What lands in your bank account

Not a 1040 line. Your gross pay minus all withholding (federal, state, FICA) and pre-tax deductions. A completely separate cash concept.

2026 Standard Deduction by Filing Status

Single

$15,000

2026 est.

Married Filing Jointly

$30,000

2026 est.

Head of Household

$22,500

2026 est.

Married Filing Separately

$15,000

2026 est.

Standard deductions are inflation-adjusted annually. Verify current figures via IRS Rev Proc before filing. Additional standard deduction for age 65+ and blind taxpayers applies on top.

Worked Example: Continuing from the AGI Example

Gross Income$105,000
Above-the-line adjustments-$6,353
AGI (Line 11)$98,647
Standard Deduction (2026 single)-$15,000
QBI Deduction (20% of $5k Schedule C)-$1,000
Taxable Income (Line 15)$82,647
Federal Tax (22% bracket approx.)~$12,900
Net Take-Home (separate from taxable income)~$74,000

Net take-home is separate - it reflects what lands in your bank account after employer withholding (federal, state, FICA). It is not the same as taxable income.

Itemising vs Standard Deduction

You itemise deductions on Schedule A when your total qualifying expenses exceed the standard deduction. Common itemised deductions include:

DeductionLimit
Mortgage InterestLoans up to $750k (post-Dec 2017)
State and Local Taxes (SALT)$10,000 cap (TCJA; verify OBBBA 2025 changes)
Charitable Contributions (cash)Up to 60% of AGI
Medical ExpensesExcess over 7.5% of AGI floor
Casualty LossesFederal disaster declarations only (post-TCJA)

FAQs

What is the difference between gross income and taxable income?
Gross income is everything you earned from all sources. Taxable income is Form 1040 Line 15 - the much smaller number that federal income tax brackets are applied to. Taxable income equals gross income minus above-the-line adjustments (AGI) minus the standard or itemised deduction. For a $100k single earner with no adjustments, taxable income is roughly $85,000 after the $15,000 standard deduction.
What is the 2026 standard deduction?
The 2026 standard deduction is approximately $15,000 for single filers, $30,000 for married filing jointly, and $22,500 for head of household. These are inflation-adjusted annually. The standard deduction is subtracted from AGI to reach taxable income. Most taxpayers benefit from taking the standard deduction rather than itemising, especially after the 2017 TCJA raised the amounts significantly.
Is taxable income the same as net income?
No. Taxable income (Form 1040 Line 15) is a tax concept: the number used to calculate your federal income tax. Net income or take-home pay is a cash concept: the money that actually lands in your bank account after all withholding. Even after you know your taxable income and calculate your tax, you still need to subtract FICA (Social Security and Medicare) from gross pay to find your true net pay.
When should I itemise instead of taking the standard deduction?
You should itemise when your total deductible expenses exceed the standard deduction. Common itemised deductions include mortgage interest (for homes bought before certain dates), state and local taxes (capped at $10,000 SALT under TCJA), charitable contributions, and medical expenses above 7.5% of AGI. For most middle-income taxpayers, the standard deduction is larger since the 2017 TCJA doubled the amounts. Run the numbers in your tax software each year.