Definition
Gross income is the total amount of money earned before any deductions or taxes are taken out. For individuals, it includes wages, salary, bonuses, commissions, rental income, interest, dividends, and other sources of income before taxes, retirement contributions, health insurance premiums, and other deductions. For businesses, gross income is total revenue minus the cost of goods sold.
Formula
For individuals: Salary + Wages + Bonuses + Tips + Rental Income + Interest + Dividends + Other Income. For businesses: Total Revenue - Cost of Goods Sold.
Example
Individual Gross Income Example
If you earn a $60,000 annual salary, receive a $5,000 year-end bonus, earn $200 in interest from savings, and receive $1,200 in dividends from stocks, your gross income is $66,400. Your net income (take-home pay) would be significantly lower after federal and state taxes, Social Security, Medicare, health insurance, and 401(k) contributions are deducted.