Written by the Fiveable Content Team • Last updated September 2025
Written by the Fiveable Content Team • Last updated September 2025
Definition
Gross income (pay) is the total amount of money earned by an employee before any deductions such as taxes, social security, and health insurance. It includes wages, salaries, bonuses, and any other compensation.
5 Must Know Facts For Your Next Test
Gross income is calculated before any payroll deductions are made.
It forms the basis for calculating net income or take-home pay.
Employers are required to report gross income on employee pay stubs and W-2 forms.
Gross income includes all taxable earnings such as overtime and bonuses.
Understanding gross income is crucial for preparing accurate payroll records and financial statements.
Review Questions
Related terms
NetIncome: The amount of money an employee takes home after all deductions have been made from their gross income.
PayrollDeductions: Amounts subtracted from an employee's gross income for taxes, social security, healthcare, retirement contributions, etc.
W2Form: A tax form used in the United States to report wages paid to employees and the taxes withheld from them.