Distinction between tax accounting and financial accounting While financial accounting focuses on providing a comprehensive picture of a company's financial health for external stakeholders, tax accounting is primarily concerned with fulfilling tax obligations and calculating tax liability.

Tax accounting is the subsector of accounting that deals with the preparations of tax returns and tax payments. Tax accounting is used by individuals, businesses, corporations and other entities. Tax accounting for an individual focuses on income, qualifying deductions, donations, and any investment gains or losses.

Taxable income is the portion of your gross income used to calculate how much tax you owe in a given tax year. It can be described broadly as adjusted gross income (AGI) minus allowable itemized or standard deductions.