Gross income
Also called Gross pay
Total earnings before any taxes, retirement contributions, insurance premiums or other deductions are taken out.
What it means
Gross income is the full amount you earn. For a salaried worker it is the annual salary; for an hourly worker it is hourly pay times hours worked, plus overtime, bonuses and tips. Households may also count income from investments, rental property or self-employment.
Gross income is the number lenders, landlords and many programs ask for, because it is consistent and easy to verify. It is different from take-home pay, which is what remains after withholding and deductions, and from adjusted gross income, a specific tax figure on your federal return.
Example
For example, a worker earning $25 an hour for 40 hours a week over 52 weeks has a gross income of $52,000 a year, or about $4,333 a month, before any deductions.
How it’s used
- Applying for a mortgage or apartment, where income requirements are usually based on gross pay
- Calculating debt-to-income ratio
- Comparing job offers on a like-for-like basis
Related terms
Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.