Connect with us

Gross Income

« Back to Glossary Index

What Is Gross Income?

Gross income refers to all forms of income enjoyed by or payments made to an individual, and it is also known as gross pay. Asides from wages, salaries, payments, commissions, tips, and bonuses, it also includes dividends, rental income, interests, annuities, pension, alimony, royalties, income from freelancing gigs, consultancy, intellectual property rights, capital gains from investments, earnings from gambling or any other alternative form of compensation for services rendered.

Deeper Definition

Suppose an individual seeks to get a credit facility from a financial institution or wants to get a rental property. In that case, one of the most important factors considered is the gross income to determine the capacity of the said individual to repay, considering the said person’s inflow of cash.

In businesses, gross profits are recorded in their income statements before such reductions as interest, taxes, indirect expenses, and direct costs due to the production of the goods being sold. The production costs are categorized as ‘cost of goods sold’ and include labor costs, procurement of raw materials, transportation, and delivery.

Thus, for businesses, the gross income is calculated thus:


Usually, in the case of organizations, the employers directly remove federal and state taxes, social security benefits, and health insurance costs before payments are made to the employees. Still, private business owners, self-employed individuals, independent media personnel, freelancers, and so on are required to remit their taxes as at when due from their proceeds.

Gross Income Example

Assume we wish to calculate an individual’s annual gross income, including his or her annual pay, annual salary bonuses, online sales, cryptocurrency revenues, interest on savings, dividends on stocks, rental income, and consultancy services. The real income made can be summed up, and as such, the total annual gross income will be calculated pre-tax.

« Back to Glossary Index

Get the news right in your inbox