Which term describes the difference between gross income and net income?

The difference between gross income and net income is best described by the term "deductions." Deductions refer to the specific expenses that are subtracted from gross income to arrive at net income. These deductions can include items such as tax deductions, contributions to retirement accounts, and certain allowable expenses that reduce the total taxable income. Essentially, deductions are critical components in the calculation of net income because they represent the costs that are subtracted from the total income earned.

The other terms, while related to income and finances, do not specifically describe this difference. Taxable income refers to the portion of income subject to taxation after deductions are applied. Adjusted income is a broader term that may consider adjustments to income that can affect tax liabilities or benefits. Expenditures typically indicate overall spending but do not directly pertain to the relationship between gross and net income. Thus, the correct understanding centers around the role of deductions in the income calculation process.