How is taxable income defined under the ACA principles?

Taxable income under the ACA principles is defined as the income that remains after all allowable deductions and exemptions have been applied. This means it reflects the actual amount of income that is subject to taxation, providing a clearer picture of a taxpayer's financial situation for tax purposes.

The process typically starts with gross income, which includes earnings from various sources, but it is then adjusted by subtracting permissible deductions—such as business expenses, contributions to retirement accounts, and certain credits—to arrive at the figure that will be taxed. Thus, taxable income is a more precise measure that accounts for the expenses and allowances recognized by the tax law. This definition serves as a cornerstone for calculating individual and business tax liabilities and is crucial for understanding how tax obligations are determined.