Disposable Income — Definition and What It Means for Your Income
The money remaining after taxes that you can spend or save as you choose.
Disposable income is your total income after all taxes (federal, state, FICA) have been deducted. It represents the funds available for spending, saving, or investing — before subtracting fixed expenses like housing.
Source: IRSSource: Bureau of Labor Statistics
Why it matters
Disposable income is the starting point for budgeting. Understanding your true take-home pay — not your gross salary — is essential for realistic financial planning.
Example
A $70,000 gross salary in Texas might yield approximately $58,000 in disposable income annually after federal taxes and FICA, since Texas has no state income tax.
Related tools
Related terms
FAQ
Disposable Income — FAQ
Is disposable income the same as take-home pay?
Yes, the terms are often used interchangeably to mean income remaining after taxes are deducted.