Gross income, also called gross earnings, is the total amount of money earned by an individual or business before any deductions, taxes, or expenses are taken out.
For individuals, gross income includes:
Salary or wages
Bonuses
Overtime pay
Commissions
Other income sources, like rental income, freelance work, or interest from investments
For businesses, gross income (often referred to as gross revenue) is the total revenue generated from sales and services before accounting for expenses like cost of goods sold (COGS), operating costs, taxes, and other deductions.
Why Gross Income Matters:
Budgeting and Planning: It helps individuals and businesses understand their top-line revenue, giving a sense of total earning capacity.
Taxes: Gross income is a starting point in tax calculations, as deductions and credits are applied to it to determine taxable income.
Lending and Credit: Financial institutions look at gross income to assess an individual's or company's ability to repay loans.
Gross income provides a foundation for analyzing profitability, expenses, and the potential to save or invest.
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