ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Disposable income is net income. It’s the amount left over after taxes. Discretionary income is the amount of net income remaining after all necessities are covered.

Detailed explanation-2: -What is Disposable Personal Income? After-tax income. The amount that U.S. residents have left to spend or save after paying taxes is important not just to individuals but to the whole economy. The formula is simple: personal income minus personal current taxes. Learn More.

Detailed explanation-3: -Disposable income, on the other hand, refers to the income that is left after paying taxes. This is the take-home income that is available to pay for both essential and nonessential expenses.

Detailed explanation-4: -For example, suppose an individual has an income of $100, 000 and pays an income tax rate of 35%. The individual has transportation, rent, insurance, food, clothing, and other necessities totaling $35, 000 a year. Their discretionary income is $30, 000 or the amount left after subtracting taxes and necessities.

Detailed explanation-5: -Discretionary income is the money you have left over after paying taxes and necessary cost-of-living expenses-like your rent or mortgage, utilities and groceries. It’s called “discretionary income” because it can be used for discretionary expenses-nice-to-haves but not necessities.