Discretionary Income Calculator

Understanding Disposable vs Discretionary Income

While both terms measure money remaining after income allocation, there is an important financial distinction between disposable income and discretionary income:

• Disposable Income: Net income remaining after paying federal, state, and local income taxes and mandatory payroll taxes (Social Security, Medicare). It is your net take-home pay.
• Discretionary Income: Money remaining after paying mandatory taxes and essential living expenses (housing, utilities, food, minimum debt payments, and basic healthcare).

How Discretionary Income is Calculated

For general budgeting, the formula is straight forward:

$$\text{Discretionary Income} = \text{Gross Income} - \text{Taxes} - \text{Essential Expenses}$$

Federal Student Loan Standard (IDR Plans)

For federal student loan Income-Driven Repayment (IDR) plans such as SAVE, PAYE, and IBR, discretionary income has a specific federal definition:

$$\text{IDR Discretionary Income} = \text{Adjusted Gross Income (AGI)} - (\text{Poverty Line Guideline} \times \text{Threshold \%})$$

Depending on the repayment plan, the threshold is either 150% or 225% of the annual federal poverty guideline for your household size and location.

Related Financial Calculators

Discover additional budgeting and personal finance calculators:

• Disposable Income Calculator
• Debt-to-Income Calculator