What is gross income?

If you want to know everything about your taxes, you should know what “gross income” is. Basically, the An individual’s gross income is your employer’s total salary before taxes or other deductions. This includes income from all activities or sources and is not limited to income received in cash; it also includes goods or services received. The gross income annual is the amount of money a person earns in a year before taxes and includes income in all its categories.

For businesses, gross income or gross income can also be called gross margin or gross profit. A company’s gross income, found on the income statement, is the income from all of its activities minus the company’s Cost of Goods Sold (COGS).

Key information:

  • The gross income An individual’s income consists of wages and salaries plus other forms of income, including pensions, alimony, interest, dividends, and rents.
  • A business’s gross income, also known as gross profit or gross margin, includes the business’s gross income minus the cost of goods sold, but does not include all other costs involved in running the business.
  • Individual gross income is part of a tax return and, after certain deductions and exemptions, becomes adjusted gross income and then taxable income.

Understanding gross income

Individual gross income

The gross income or gross income of an individual is used by lenders and landlords to determine whether that individual is a worthy borrower or renter. When filing federal and state taxes, gross income is the starting point before deductions are subtracted to determine the amount of tax due..

For individuals, the gross income metric used on the tax return includes not only wages or salaries but also other forms of income, such as tips, capital gains, rent payments, dividends, alimony, pension, and interest.

After subtracting the tax deductions above the line, the result is the adjusted gross income (AGI or Adjusted Gross Income).

Continuing with the tax form, deductions below the line are taken from AGI and result in a taxable income figure. After applying allowable deductions or exemptions, the resulting taxable income may be significantly less than an individual’s gross income.

There are sources of income that are not included in gross income for tax purposes, but may still be included when calculating gross income from a lender or creditor. The most common nontaxable sources of income are certain Social Security benefits, life insurance payments, some inheritances or gifts, and interest on state or municipal bonds.

Gross income of the company

A company’s gross revenue, or gross profit margin, is the simplest measure of the company’s profitability.. Although the measure of gross income includes the direct cost of producing or providing goods and services, it does not include other costs related to sales activities, administration, taxes and other costs related to running the business in general.

Individual gross income example

Suppose an individual has an annual salary of $75,000, earns $1,000 a year in interest from a savings account, collects $500 a year in stock dividends, and receives $10,000 a year in rental income. His annual gross income is $86,500.

Example of gross income of a company

Gross income is an item that is sometimes included in a company’s income statement but is not required. If not displayed, it is calculated as gross income minus the COGS.

Gross Receipts = Gross Receipts-COGS


COGS = Cost of Goods Sold

LGross income or gross income is sometimes called the gross margin.. Then there’s the gross profit margin, which is more correctly defined as a percentage, and is used as a profitability metric. A company’s gross income reveals how much money it has made on its products or services after subtracting direct costs to make the product or provide the service.

Keep reading: