Gross Income

Gross income is the total amount of income earned before taxes, benefits, and other deductions are taken out. For an employee, that can include regular wages or salary, overtime, bonuses, commissions, tips, and other taxable compensation.

On a paycheck, gross income is the starting point before deductions such as federal and state income taxes, Social Security and Medicare taxes, health insurance premiums, and retirement contributions are applied. What remains after those deductions is the employee's net pay, or take-home pay.

Gross income can also have a broader meaning for tax purposes. Depending on the situation, it may include income from sources beyond an employee's paycheck, such as self-employment income, interest, rental income, or other taxable earnings.

For employers, calculating gross income accurately matters because it affects payroll taxes, withholding, benefit calculations, and employee pay records. Not every payment or benefit is treated the same way for tax purposes, so employers need to understand which types of compensation should be included in taxable wages.

Frequently asked questions

What is the difference between gross income and net income?

Gross income is the amount earned before taxes and deductions. Net income is what remains after those amounts are taken out. On an employee's paycheck, net income is commonly called take-home pay.

What is included in gross income for an employee?

Gross income can include salary or hourly wages, overtime, bonuses, commissions, tips, and other taxable compensation. The exact amount included can depend on the type of payment and applicable tax rules.

Is gross income the same as taxable income?

Not necessarily. Gross income is the starting point, while taxable income is the amount that remains after applicable adjustments and deductions are taken into account for tax purposes.