Pretax income

pretax income

Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. Also called earnings before taxes, pretax.

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Pretax income. Pretax income, sometimes described as pretax dollars, is your gross income before income taxes are withheld.

Any contributions you make to a salary reduction retirement plan, such as a traditional 401(k) or 403(b) plan, or to a flexible spending account comes out of your pretax income.

The contribution reduces your current income and the amount you owe in current income taxes.