Discretionary Income Calculator (2024)

FAQs

How do you calculate discretionary income? ›

For most IDR plans, discretionary income is calculated by deducting 150% of the poverty line amount from your AGI. The only exception is the Saving on a Valuable Education (SAVE) plan, which deducts 225% from your AGI instead of 150%. You can find your AGI on your most recent tax return.

For a simple example, let's say your annual discretionary income is $12,000 and you're on PAYE. That means 10% of your discretionary income would be your student loan repayment amount. $12,000 * 10% = $1,200 per year. So, your monthly payment would be $100.

An example is if a person makes $4,000 per month after taxes and has $2,000 in essential costs, they have $2,000 in monthly discretionary income. If their paycheck gets cut to $3,000 per month, they can still meet their essential costs but only has $1,000 leftover in discretionary income.

Discretionary income is equal to disposable income minus all payments for necessities, including a mortgage or rent payment, health insurance, food, and transportation. This portion of disposable income can be spent at will. Discretionary income is the first to shrink after a job loss or pay reduction.

Take your disposable income, which is the amount of money after taxes left, for example, in your paycheck. Subtract all of your necessities like paying for rent or housing, student loans, utilities, and food, and whatever is left over to spend, save, or invest is your discretionary income.

50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).

Discretionary income, on the other hand, is the amount you have after deducting taxes and necessities — it includes deductions and expenses like your housing, food, and transportation.

According to a 2018 article in The Motley Fool, the average level of discretionary income for U.S. households was $20,748 per year, or $1,729 per month. According to a 2021 survey by The Balance, however, over half of Americans had $250 or less of discretionary income each month.

Spend 50% of your monthly income on necessities. Spend 30% of your monthly income on discretionary expenses. Put 20% of your income toward debt payments and saving and investment goals.

Discretionary income is the amount of post-tax income that is left over after you have paid for all the essentials of daily life. These expenses include your mortgage or rent, utilities, and car payments or bills, as well as food, healthcare, and occasionally clothing (if it is needed, not just wanted).

What is a good amount to have leftover after bills? ›

As a result, it's recommended to have at least 20 percent of your income left after paying bills, which will allow you to save for a comfortable retirement. If your employer offers matching 401(k) contributions, take advantage so you can maximize your investment dollars.

To increase discretionary income, you can reduce necessary expenses like rent, utilities, and groceries, find ways to increase your income through a higher-paying job or a side hustle and minimize debt payments.

For the Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Repayment Plan, and loan rehabilitation, discretionary income is the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.

Discretionary income is the money you have leftover after paying for necessities like housing, groceries, everyday expenses and necessary bills. It's often used to calculate repayment of federal student loans, though not everyone makes enough money to have discretionary income.

Discretionary income, however, is the remaining sum after accounting for all essential expenses. These expenses include rent, transportation, food, and utilities, as well as insurance and other necessities. By subtracting these costs from your disposable income, you can calculate your discretionary income.

Final answer: Discretionary income is calculated by subtracting expenses from total income. It represents the money available for non-essential spending or savings.

Discretionary income is the amount of a taxpayer's earnings that remains after subtracting income taxes and other mandatory costs, like rent, mortgage payments, food, transportation or insurance.