What is the Difference Between Personal Income and Personal Disposable Income?

The difference between personal income and personal disposable income lies in the taxes that have been deducted.

• Personal Income represents all payments made to individuals before taxes. It includes not only gross pay from work but also dividends, rental income, interest, and other sources of income collected by individuals or households in a country. Personal income is calculated by adding up all the income received by individuals or households in a country.
• Personal Disposable Income, also known as Disposable Personal Income (DPI), is the amount of money that an individual or household has to spend or save after income taxes have been deducted. It is an important economic indicator used to gauge the health of the economy, as it shows the actual amount of money that people have to spend, save, or invest. Analyzing after-tax income is crucial, as this is the money that the population is effectively left with to spend, save, or invest. Personal disposable income is calculated by taking the personal income number and subtracting personal income taxes.

In summary, the main difference between personal income and personal disposable income is that the latter takes into account the income taxes that have been deducted, providing a more accurate representation of the actual amount of money available for individuals to spend, save, or invest.

Comparative Table: Personal Income vs Personal Disposable Income

The difference between personal income and personal disposable income lies in the taxes and deductions. Here is a table summarizing the differences:

In summary, personal income refers to the total income before taxes, while personal disposable income is the amount left after taxes and mandatory deductions. Disposable income is important for understanding the actual amount of money people have to spend, save, or invest after accounting for taxes and necessities.