How this calculator works
Personal income is the income households receive before taxes, including wages, self-employment earnings, investment income and government transfers. Disposable personal income subtracts taxes on income and wealth and adds transfers such as pension and benefit payments, giving the amount households can spend or save. It is a national accounts aggregate: it includes in-kind income where the statistical agency counts it and excludes unrealized capital gains. It is not take-home pay for an individual, and it says nothing about how income is distributed between households.
Formula
Disposable personal income = personal income - government taxes + government transfers. Rearranged, personal income = disposable income + taxes - transfers, taxes = personal income + transfers - disposable income, and transfers = disposable income - personal income + taxes.
Worked example
Personal income of $5,000 with $1,000 of taxes and $500 of transfers leaves disposable income of $4,500. Taxes are 20% of personal income in that case.
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Frequently asked questions
Are transfers part of personal income?
In the national accounts, current transfers received by households are included in personal income. This tool lets you enter income excluding transfers and add them separately, which avoids counting them twice.
Does this include sales taxes?
No. Disposable income is measured before consumption taxes such as GST or HST, because those are paid when spending rather than deducted from income. The purchasing power of disposable income therefore depends on what is bought.
Why does the tool reject negative taxes?
A negative tax would mean a net refund larger than the tax system allows in this simple identity. If you are modelling refundable credits, enter them as transfers instead.