What is a Gross Income?

‘Gross income’, often referred to as total income, is the total amount of money an individual or business earns before any deductions or taxes are taken into account. It includes all sources of income, such as wages, salaries, bonuses, interest, dividends, rental income, business profits, and any other forms of earnings.

For individuals, gross income typically encompasses all the money they receive from various sources before any deductions. This includes their salary or wages from their primary job, income from secondary jobs, income from investments (e.g., interest and dividends), rental income, alimony, and other sources of income. It’s important to note that gross income does not account for expenses, deductions, or taxes.

For businesses, gross income represents the total revenue generated from their operations before subtracting operating expenses, cost of goods sold (COGS), and taxes. Gross income is a key financial metric for businesses because it provides an initial overview of their financial performance and the potential profitability of their operations.

In both personal and business finance, gross income is a starting point for calculating net income or taxable income. To arrive at net income or taxable income, one must deduct various expenses, deductions, and taxes from the gross income. Net income is the actual amount an individual or business ends up with after all financial obligations have been accounted for.