Understanding Taxable Income

C

Taxable income refers to the portion of an individual or business's gross income that is subject to taxation by the government. To calculate taxable income, certain deductions and exemptions are subtracted from gross income, which results in a lower taxable income amount.

Option A is incorrect because it mentions the deduction of expenses, which are not typically subtracted from gross income to calculate taxable income. Instead, adjustments, deductions, and exemptions are subtracted.

Option B is incorrect because it includes the term "depreciations," which is not relevant to the calculation of taxable income.

Option C is the correct answer. To calculate taxable income, adjustments to income (such as IRA contributions or student loan interest), deductions (either the larger of itemized deductions or the standard deduction), and exemptions are subtracted from gross income.

Option D is incorrect because it specifies "earned income," which is only a subset of gross income. Taxable income includes all types of income, not just earned income.

In summary, taxable income is calculated by subtracting adjustments, deductions, and exemptions from gross income, as described in option C.