Which of the following statements is true regarding taxable income for residents?

Taxable income for residents refers to the total income that is subject to taxation by the state and federal authorities. The correct statement regarding this topic is that residents are taxed on worldwide income. This means that California residents must report and pay taxes on all sources of income, regardless of where it is earned, including wages, business income, investments, and other income streams from both domestic and international sources.

This approach aligns with the principle that residency establishes a tax obligation on global income, distinguishing it from non-residents who are typically taxed only on income sourced within the state. Understanding this concept is crucial for residents as it impacts how they report their income and determine tax liabilities.

In contrast, the other statements present misconceptions about taxable income. Taxable income is not fixed and can fluctuate based on various factors, including changes in earnings or deductions. It also does not exclusively consist of federal income; taxpayers need to consider state income in addition to federal. Lastly, residents are not limited to being taxed solely on income earned within California, as their tax responsibility extends to income generated from worldwide sources.