Close this search box.

Table of Contents

Gross Income


Gross income is the total income earned before any deductions such as taxes or other expenses are taken into account. It includes all sources of revenue, such as salary, wages, interest, dividends, and rental income. It is often the starting point for calculating net income and taxable income.


The phonetics of “Gross Income” is: /ɡrōs ˈinˌkəm/

Key Takeaways

  1. Gross Income Definition: Gross income is the total amount of earnings or revenue generated before any taxes, deductions, and expenses are taken into account. It is essentially the starting point for determining a person’s or a business’s taxable income.
  2. Components of Gross Income: Gross income includes salary, wages, tips, capital gains, dividends, interest income, rental income, alimony, business income and other forms of compensation. It can be from an individual perspective (personal income) or from a business perspective (business revenue).
  3. Role in Tax Calculation: Gross income plays a significant role in tax calculations as it acts as the base figure. After determining the gross income, deductions and exemptions are subtracted to calculate the taxable income. The higher the gross income, the higher the tax liability, provided all other factors are constant.


Gross income is a critical term in business and finance as it stands as a key measure of a company’s profitability and overall financial health. It is calculated by subtracting the cost of goods sold (COGS) from the total revenue. This figure provides a clear view of the company’s operational efficiency and performance. By knowing the gross income, businesses can understand their revenue competency without considering all the operational, interest, and tax costs. It is a valuable evaluation tool for both internal management and external investors, enabling them to assess the company’s ability to generate profit. Therefore, the higher the gross income, the healthier the company’s operations are often considered.


Gross income is a key figure in financial management and tax planning, serving as the foundation upon which both personal and business financial activities are assessed. Gross income represents the total income from all sources before any deductions, providing a comprehensive view of a person’s or firm’s earning capacity. It is the raw input that helps investors, creditors, and other stakeholders evaluate an entity’s economic strength and profitability. It’s a crucial measure and the first significant marker on income statements that paints a broader picture of financial health before other considerations like expenses, deductions, and taxes come into play.In a corporate context, gross income’s purpose is to evaluate the core profitability of a business before operating expenses and taxes are factored in. It helps businesses understand the profitability of their primary operations, providing insights that are useful for strategic planning, investment decisions, and identifying potential areas for cost savings or increase in revenue. On personal finance side, one’s gross income is used to determine eligibility for financial products, such as credit cards or mortgages, and to calculate tax liabilities. It is essential to note that only ‘taxable’ income categories count towards gross income for tax computation. Hence, understanding one’s gross income is a crucial step in effective financial planning and wealth management.


1. John is a software engineer who works for a technology firm and earns a yearly salary of $100,000. This is his gross income, as it does not take into account any deductions such as taxes or retirement contributions.2. A small bakery business reported a total revenue of $500,000 from selling pastries and cakes in one year, this total earnings before subtracting cost of goods sold or operating expenses would be considered as the gross income of the business. 3. Susan is a freelance graphic designer. She was paid $2,000 for a logo design, $3,000 for a website design, and $5,000 for a branding project in a month. Her gross income for that month would be the total of those, which equals $10,000, prior to any expenses or taxes being deducted from it.

Frequently Asked Questions(FAQ)

What is Gross Income?

Gross income, in simplest terms, refers to an individual’s or a company’s total earnings or revenue before any deductions such as taxes, insurance, or any other expenses are made.

How is Gross Income calculated?

For an individual, gross income is calculated by summing all wages, salaries, profits, interests payments, rents, and other forms of earnings, before deductions. For a company, gross income is generally calculated as total revenue minus cost of goods sold (COGS).

What is the difference between Gross Income and Net Income?

Gross income refers to the total revenue earned before deductions, while net income refers to the profit made after all deductions, taxes, operating expenses, etc. have been subtracted from the gross income.

Is Gross Income the same as Total Revenue in business terms?

No, they are not the same. Total revenue refers to the total receipts from selling a certain quantity of goods or service. Gross income, on the other hand, is the income left over after subtracting the cost of goods sold from total revenue.

Can Gross Income be negative?

No, gross income cannot be negative. It can either be zero or a positive amount.

Do all forms of income count towards Gross Income?

Yes, all forms of income such as wages, salaries, commission, bonuses, income from rental property, profits from sales, etc. are included in gross income.

Is it necessary for a business to calculate its Gross Income?

Yes, it is necessary as gross income offers a snapshot of a company’s overall fiscal health and helps in identifying how effectively a business is using its resources to generate profit.

Related Finance Terms

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More