The taxpayer's total income less deductions, exclusions, and exemptions that might be available to a particular taxpayer.
Tax is imposed on the taxable income.
No tax is imposed on the exemptions. The percentage at which the next dollar added to the taxable income will be taxed. The amount of the taxes a taxpayer has to pay can be reduced by tax credits. A taxpayer can get tax credits for purposes such as child care expenses and the earned income credit for low-income taxpayers. A Glossary of Tax and Accounting Terms U.S. General Accounting Office.