Shortcut Navigation:

Question for the Money Doctors

Question submitted on Mar 9, 2011.

Question

What is the true definition of "disposable income". Is it what is left after the basic life expenses are paid? Or is it the total amount of income received? We are retired, with a good income, but our property taxes are humongous. We could get a reduction if our "disposable income" is less than $35K annually.
Thanks!

Answer

The Bureau of Economic Analysis defines “Disposable Personal Income” as “ Total after-tax income received by persons it is the income available to persons for spending or saving”.

The web site www.wordnetweb.princeton.edu defines disposable income as “income after taxes that is available to you for saving or spending”.

Wikipedia defines disposable income as “total personal income minus personal current taxes”.

Another term to which you might be referring is “discretionary income”.  While the Bureau of Economic Analysis does not define “discretionary income”, Wikipedia defines it as “money you have after you’ve paid all of your bills.  Discretionary income is income after subtracting taxes and normal expenses (such as rent or mortgage, utilities, insurance, medical, transportation, property maintenance, child support, etc.) to maintain a certain standard of living.


For additional information visit http://www.360financialliteracy.org/