Gross Income

Gross income is the sum of all forms of income you receive before paying taxes and deductions. Gross income differs from net income, which is the amount of income you have left after paying taxes and deductions. Your gross income affects your ability to borrow and get credit, and it influences how much you pay in taxes.

Terry Turner, Financial writer for
  • Written By
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner is a senior financial writer for He holds a financial wellness facilitator certificate from the Foundation for Financial Wellness and the National Wellness Institute, and he is an active member of the Association for Financial Counseling & Planning Education (AFCPE®).

    Read More
  • Edited By
    Savannah Hanson
    Savannah Hanson, financial editor for

    Savannah Hanson

    Senior Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

    Read More
  • Financially Reviewed By
    Rubina K. Hossain, CFP®
    Rubina K. Hossain

    Rubina K. Hossain, CFP®

    Certified Financial Planner™ Professional

    Certified Financial Planner Rubina K. Hossain is chair of the CFP Board's Council of Examinations and past president of the Financial Planning Association. She specializes in preparing and presenting sound holistic financial plans to ensure her clients achieve their goals.

    Read More
  • Updated: May 17, 2023
  • 3 min read time
  • This page features 6 Cited Research Articles
Fact Checked
Fact Checked partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

Cite Us
How to Cite's Article

APA Turner, T. (2023, May 17). Gross Income. Retrieved June 10, 2023, from

MLA Turner, Terry. "Gross Income.", 17 May 2023,

Chicago Turner, Terry. "Gross Income." Last modified May 17, 2023.

Why Trust
Why You Can Trust
Content created by and sponsored by our affiliates. has been providing consumers with the tools and knowledge needed to confidently make financial decisions since 2013.

We accept limited advertising on our site to help fund our work, including the use of affiliate links. We may earn a commission when you click on the links at no additional cost to you.

The content and tools created by adhere to strict editorial guidelines to ensure quality and transparency.

What is Gross Income?

The term gross income applies to both individuals and businesses. For individuals, gross income — sometimes called gross pay — typically refers to how much you receive in your paycheck before your deductions and taxes are taken out. Individual gross income also includes the total amount of all other income you receive from all other sources (before taxes and deductions.) This may include property or services you receive as payment, bonuses or barter.

A business’s gross income, also called its gross profit, is the company’s total revenue minus the cost of goods or services sold. These costs include all costs associated with running the business. Business gross income is often used as a measure of the business’s profitability.

Other Terms Associated With Gross Income

Adjusted Gross Income
Adjusted gross income — also known as AGI — appears on your tax form. AGI takes your gross income and subtracts the tax deductions, tax exemptions, tax credits or other adjustments for which you qualify. This calculates the portion of your income which will be taxed and is used to identify you for e-filing your income tax return.
Net Income
Net income, for an individual, is also known as your take-home pay. In other words, it’s the amount of money you have left over after deductions and taxes are taken out of your gross income.

Financial analyst Chip Stapleton explains adjusted gross income and how is it taxed.

Where Does Gross Income Come From?

Your gross income, the total of all money you earn from all sources, can come in many forms.

Sources used in determining an individual’s gross income include:

  • Alimony payments you receive
  • Annuity income
  • Bonuses
  • Business income if you are self-employed
  • Capital gains on investments
  • Commissions
  • Dividends from stocks or bonds
  • Gambling winnings
  • Income from inheritance
  • Income from interest on a trust or estate
  • Interest income from bank accounts, certificates of deposit (CDs) or other savings accounts
  • Money earned from selling goods or services online or in person
  • Rental income
  • Royalties
  • Salary or hourly wages
  • Tips

Source: Legal Information Institute

Some forms of gross income may be nontaxable — meaning they won’t affect your income tax rate, tax payments or tax bracket. These types of income include inheritances, life insurance payouts, returns on municipal or state bonds, workers’ compensation and certain other types of income.

Read More: Investing for Beginners

Calculating Your Gross Income

Calculating your gross income is simple: Add up all the sources of income you receive, before taxes and other deductions, and the total is your gross income.

Calculating Annual Gross Income

To calculate your monthly gross income, simply divide your annual total by 12 (or divide by 52 for your weekly gross income.)

Why Is Understanding Gross Income Important?

Banks, credit cards, auto dealerships and other lenders use your gross income to determine how much credit they will give you or how much money they will loan you.

Lenders use a debt-to-income ratio, or DTI, to calculate how much they are willing to risk on you. The higher the DTI, the higher the interest you will be charged. Typically, lenders will not issue a loan if your debt is 36 percent or more of your gross income.

Knowing your gross income can help you determine if you can get an affordable car loan or mortgage. Understanding your DTI can also help you make wise personal finance decisions that keep you from going too deeply into debt.


Connect With a Financial Advisor Instantly

Our free tool can help you find an advisor who serves your needs. Get matched with a financial advisor who fits your unique criteria. Once you’ve been matched, consult for free with no obligation.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: May 17, 2023

6 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Consumer Finance Protection Bureau. (2019, November 15). What is a debt-to-income ratio? Why is the 43% debt-to-income ratio important? Retrieved from
  2. Donston-Miller, D. (2021, March 5). What Is Gross Income? Retrieved from
  3. Internal Revenue Service. (2021, February 25). Definition of Adjusted Gross Incomes.
  4. Internal Revenue Service. (2021, September 29). Tax Withholding Estimator. Retrieved from
  5. Internal Revenue Service. (n.d.). 26 CFR § 1.61-2: Compensation for services, including fees, commissions, and similar items. Retrieved from
  6. Legal Information Institute. (n.d.). 26 CFR § 61 -- Gross Income Defined. Retrieved from