Disposable income is the amount of income that an individual has available after income taxes have been deducted. This residual amount is then available for spending or saving. The average amount of disposable income is used as a measure of the health of the national economy. The concept is also used as part of the calculation of discretionary income, which is calculated by deducting necessary expenditures (such as rent and food) from disposable income.
For example, a family has taxable income of $120,000. After paying 30% in income taxes, the family has $84,000 of disposable income remaining.