What is the term for the income used to calculate tax, which is generally less than adjusted gross income?

The term that refers to the income used to calculate tax, which is typically less than adjusted gross income, is taxable income. Taxable income is the amount of income that is subject to taxation after deductions, exemptions, and credits have been applied to the adjusted gross income (AGI).

Taxable income takes into account various deductions that may apply, such as the standard deduction or itemized deductions, which lower the income that ultimately gets taxed. This concept is fundamental in understanding how taxes are calculated, as it directly impacts the amount of tax owed by an individual.

In contrast, adjusted gross income itself is the total income minus specific deductions but does not account for the further deductions allowed to arrive at taxable income. Thus, while AGI is an important figure in the tax calculation process, it is the taxable income that determines the actual amount liable for taxes. This distinction emphasizes the importance of understanding how various income figures are used in tax calculations.