What is the difference between earned income and taxable income

That big bag of money is full of traditional earnings along with take home money from Interest and dividends, Social Security, and Social Security Disability. Keeping with the idea of big bags of money, earned income has much of the same stuff as gross income, but without the passive revenue streams. Think of earned income as gross income, minus the investments and retirement. If you work for someone else, work for yourself or run a farm, the taxable money you pull in automatically qualifies as earned income.

See the full IRS list here. This is your gross income with above the line deductions applied. When your gross income is smaller, you pay fewer taxes on it — and fewer taxes are a very good thing. The Tax Season for opened on 1 July The income tax return which should be completed by individuals is known as the ITR12 form.

If you have forgotten your password, you can reset by calling our Contact Centre and following a simple procedure. For more information see the Tax Exempt Institution webpage :. Businesses and Employers. Tax Practitioners. Customs and Excise. Personal Income Tax. Examples of amounts an individual may receive, and from which the taxable income is determined, include —. For the year of assessment 1 March — 28 February See more tax rates here.

Top tip: You do not need to submit a return if ALL the criteria below apply to you:. The rate of tax levied on an individual is set on a sliding scale which results in the tax increasing as taxable income increases. Every year, the Minister of Finance announces the rates to be levied by publishing the applicable tax tables during the annual budget speech. Step 1: You must register for income tax If you earn a taxable income which is above the tax threshold see above , you must register as a taxpayer with SARS.

Step 2: You must submit a return If you are registered for income tax, you will be required to submit an annual income tax return to SARS based on the Gazette. When should it be submitted? If you have not received an SMS, you can also file immediately and do not have to wait until 1 September.

Deductions allow you to reduce your gross income by the amount of various deductible expenses. Exemptions allow you to reduce your gross income by a specified amount for each dependent you claim, including yourself. Instead, tax credits directly reduce the amount of tax you owe. Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics.

Money Markets. By Mark Kennan. Customs and Excise. Income from two sources. What to do if you receive income from two sources? An example The table below gives an example of how the combined taxable income is calculated in the case of a taxpayer who is over the age of 65 years and receives a salary of R and a pension of R during the tax year. The second option is to increase the amount of PAYE deducted by one or more employers or retirement funds but is slightly more complex to calculate.

The taxpayer may need assistance from SARS, their tax practitioner or the payroll personnel at their employer or retirement fund. Secondly, identify the recommended percentage at which tax should be deducted, based on the combined estimated taxable income by referring to the table below. The table sets out the percentage at which tax should be withheld at the various combined taxable income levels.

This table is simply an estimate of the tax liability, and it is still possible that there may be an under or over recovery of tax when using these percentages.

Thirdly, request the employers and retirement funds to apply as a minimum the applicable percentage at which to deduct PAYE from the salary or pension paid by each of them.