Definition of Disposable Income

What is “disposable income”? What is the definition of the term “disposable income”? What does “disposable income” mean?

Disposable income is the money that you have left over once taxes have been subtracted from your gross income.

The formula for calculating disposable income looks like this:

Disposable Income = Gross Income - Taxes

So, let’s say that your monthly gross income is $4,500, and $1,200 a month is subtracted for various taxes:

$4,500 Gross Income - $1,200 Taxes = $3,300 Disposable Income

Disposable income is money that needs to cover food, shelter, clothes, non-essential purchases, savings, etc.

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