after-tax income

Profit

A company's total revenue less its operating expenses, interest paid, depreciation, and taxes. For example, suppose a widget manufacturer earns $1,000,000 in total revenue. The widgets cost $200,000 to make and his administrative and payroll expenses total $250,000. He also must subtract $50,000 in depreciation on his widget manufacturing equipment and pay $200,000 in taxes. His net income is stated as: $1,000,000 - $200,000 - $250,000 - $50,000 - $200,000 = $300,000.

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After-tax income.

After-tax income, sometimes called post-tax dollars, is the amount of income you have left after federal income taxes (plus state and local income taxes, if they apply) have been withheld.

If you contribute to a nondeductible individual retirement account (IRA), a Roth IRA, or a 529 college savings plan, purchase an annuity, or invest in a taxable account, you are using after-tax income.

In contrast, if you contribute money to an employer sponsored retirement plan or flexible spending account, you are investing pretax income.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

after-tax income

Income after deducting taxes.After-tax income is not the same thing as after-tax cash flow.The major difference between the two will usually occur because depreciation is a deduction from income but not cash flow.You don't write a check for depreciation.The other major difference arises because you write a check for mortgage principal payments, which reduces cash flow, but you can't deduct it,so it does not reduce taxable income.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.