Describe both taxable income and personal exemptions. (Economics)

Taxable income refers to the base upon which an income tax system imposes tax. Generally, it includes some or all items of income and is reduced by expenses and other deductions. The amounts included as income, expenses, and other deductions vary by country or system.

Under United States tax law, a personal exemption is an amount that a resident taxpayer is entitled to claim as a tax deduction against personal income in calculating taxable income and consequently federal income tax.