As the name suggests, before-tax income is the total amount of income a person makes before any taxes are deducted. For people who run their own business, it is easy to know what before-tax income actually is. For those who work a traditional job, it becomes more difficult to calculate before-tax income. Many companies automatically withhold income taxes and payroll taxes from the employee. This means that the employee will have to look at his income statement to determine what his income would have been before taxes. This term has special significance in the real estate market. Many lenders and sellers will want to know a person’s before-tax income in order to determine eligibility for a purchase. In addition to that, before-tax income is important for determining whether a person has a significant amount of tax liability. Many buyers want to know this information to determine the right way to approach mortgage interest deductions.
