What do business expenses contribute to when subtracted from revenue?

When business expenses are subtracted from revenue, they contribute to the determination of taxable net income. Taxable net income is essentially the amount of income that is subject to taxation after all allowable business expenses have been deducted from total revenue. This means that the lower the taxable net income, the lower the tax liability for the business can be, as taxes are calculated based on this figure.

Gross income refers to the total revenue generated by a business before any expenses are deducted. On the other hand, ordinary income generally refers to the regular income earned through the normal activities of the business, which also has not accounted for expenses. Lastly, tax refunds are returns of overpaid taxes and are not directly impacted by the subtraction of business expenses from revenue. Thus, the correct understanding of how business expenses influence taxable net income is essential for proper tax reporting and planning.