Gross income

Definition

Gross income is the total income earned by an individual before any deductions or taxes are applied. It includes wages, salaries, bonuses, and other forms of earnings.

5 Must Know Facts For Your Next Test

1. Gross income is the starting point for calculating federal and state income tax.
2. It includes all sources of income such as wages, rental income, interest, and dividends.
3. Gross income does not account for any deductions like retirement contributions or health insurance premiums.
4. Understanding gross income is essential for budgeting and financial planning.
5. Employers report gross income on Form W-2 for employees.

Review Questions

• What components are included in gross income?
• Why is gross income important when calculating taxes?
• How does gross income differ from net income?

Related terms

Net Income: The amount of money left after all deductions and taxes have been subtracted from the gross income.

Taxable Income: The portion of gross income that is subject to taxation after allowable deductions and exemptions.

Adjusted Gross Income (AGI): Gross income minus specific adjustments such as student loan interest, tuition fees, and retirement plan contributions.