What Is Gross Income?
Gross income is an individual’s total earnings before taxes and other deductions. Income is not limited to income received in cash. It can also include properties or services received. Gross income is also a term used in the business world, but today the focus will be on individuals.
When it comes to keeping track of your gross income, you can reference items such as recent pay stubs and direct deposits into your bank account to get an understanding of it. Gross income is typically tracked in a bi-weekly, monthly, or yearly format.
Common taxable examples of income include salary, wages, tips, capital gains, dividends, rental payments, pensions, and interest. Common nontaxable income examples include life insurance payouts, inheritances, and gifts.
An example of gross income is an individual making $80,000 per year in salary, generating $1,000 in interest, and receiving $4,000 in gifts. $80,000 + $1,000 + $4,000 = $85,000 gross income.
Why should you care about your gross income? You should care because it is an item that is asked about when it comes to qualifying for that auto loan, apartment, or a mortgage that you want. As your career progresses, you want to ensure you are in a position to continue to increase your income year-over-year. At the end of the day, the goal is long-term financial success.