Gross Income
Your total income before any taxes or deductions are taken out—the starting point for tax calculations.
What You Need to Know
Gross income is all the money you earn before Uncle Sam (or anyone else) takes their cut. It's the top line on your tax return and the basis for calculating what you owe.
What Counts as Gross Income:
- Wages, salaries, tips, bonuses
- Self-employment earnings
- Investment income (dividends, capital gains, interest)
- Rental property income
- Retirement account distributions
- Unemployment benefits
- Social Security (sometimes)
- Alimony received (for divorces before 2019)
- Prize winnings, gambling income
What DOESN'T Count:
- Gifts and inheritances
- Child support payments
- Life insurance death benefits
- Municipal bond interest (tax-free)
- Roth IRA withdrawals (if qualified)
- Employer health insurance contributions
Example Calculation:
- Salary: $75,000
- Freelance side hustle: $10,000
- Stock dividends: $2,000
- Interest income: $500
- Gross Income: $87,500
Gross Income vs. AGI vs. Taxable Income:
- Gross Income: Everything you earned
- AGI (Adjusted Gross Income): Gross income minus above-the-line deductions (IRA, student loan interest, HSA)
- Taxable Income: AGI minus standard/itemized deduction
Why It Matters: Many financial thresholds use gross income:
- Debt-to-income ratio for mortgages
- Income-driven student loan payments
- Premium tax credits for health insurance
- Certain tax credit phase-outs
Pro Tip: Lowering gross income (via pre-tax 401k, HSA, traditional IRA) reduces both AGI and taxable income—a double win for taxes.
Sources & References
This information is sourced from authoritative government and academic institutions:
- irs.gov
https://www.irs.gov/publications/p17
Related Calculators & Tools
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Related Terms in Career & Income
AGI (Adjusted Gross Income)
Your total gross income minus specific deductions, used to determine tax liability and eligibility for credits.
After-Tax Income
Your take-home pay after federal, state, and payroll taxes are deducted—the actual money you can spend.
FICA (Federal Insurance Contributions Act)
Payroll taxes that fund Social Security and Medicare, totaling 7.65% of wages for employees (matched by employers).
Marginal Tax Rate
The tax rate applied to your last dollar of income—the rate you pay on additional earnings.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize.
Tax Bracket
The range of income taxed at a specific rate under the U.S. progressive tax system.