Sam Brotman, JD, LLM, MBA December 16, 2013 4 min read

Income and Expense Table and Future Income

The IRS Income Expense Table

Similar to the asset/equity table, the IRS income and expense table (IET) outlines necessary living expenses, where the taxpayer lists both total income and expenses. The IRS income and expense table is divided into two major categories where the taxpayer eventually calculates the net difference multiplied by one or more amounts to get to “amount that could be paid from future income” (IRS.gov, “Income and Expense Table,” 8/25/2013).

Under the total income column, taxpayers must provide information with regard to the following:

  • Wages
  • Wages (spouse)
  • Interest – dividend
  • Net business income
  • Net rental income
  • Pension/Social Security (taxpayer)
  • Social Security (spouse)
  • Child support
  • Alimony
  • Other income if applicable

Taxpayers calculate amounts and list the total income in the first column of the IRS income and expense table. In the second column, taxpayers provide information concerning necessary living expenses—those claimed and those allowed. Necessary living expenses are defined as those that are required for living and carrying on daily life. Food, clothing, housing, utilities, vehicle operating costs, health insurance, out of pocket health care costs, child/dependent care, current year income taxes, state and local taxes, and secure debts are considered necessary living expenses. “Other expenses, such as charitable contributions, education, credit cards, and voluntary retirement allotments are generally not considered as necessary living expenses” (“Income/Expense Table”). The income/expense table is useful in helping taxpayers calculate both the amount that could be paid in the future and the amount that could be paid in general. The link to the PDF document is available in the reference section of this book.

Future Income Potential

Future income potential within the context of tax law and the IRS income and expense table is defined as the ability of the taxpayer to generate earnings through physical exertion. In addition, future income potential also refers to the ability of the taxpayer’s assets to generate a return on investment. Within the context of investing, future income potential refers to “earning potential,” the upside of a particular product generating earnings. The earning potential of an investment represents the largest possible profit made by a corporation and is usually passed on as dividends to the investors.[1]

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[1] For more information about earning potential, review the Investopedia definition. The link is available here: http://www.investopedia.com/terms/e/earning-potential.asp.

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Sam Brotman, JD, LLM, MBA

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