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Gross vs Net

19.02.2011 07:16:33

Gross Income vs Net Income

There is an easy formula that will help you understand clearly the topic of gross income vs net income:

Gross Income - Expenditures = Net Income

To understand each term better, let’s see into more details about net income vs gross income .

What is Gross Income

Gross income can be divided into two categories: gross income for individuals and gross income for companies.

Gross income for individuals represents the total amount of money or other equity that you receive as part of your compensation for selling your services or products. In ordinary words, this is the total revenue that you get over a certain period of time. This revenue is calculated before tax deductions are made. These are the items included to the gross income:
  • Salaries & wages

  • Tips and allowances
  • Taxable bonds and securities
  • Dividends
  • IRA payments
  • Business income
  • Alimonies
  • Unemployment compensations
  • Rental services
  • Taxable refunds of the Social Security program
As a rule, gross income doesn’t include gifts and inherited items as well as the interests from non-taxable bonds.

Gross income for companies is also known as a gross profit , which is defined as the revenue amount before deducting the cost of products.

What is Net Income

Net income is the income you actually bring home when all the fees, taxes, medical insurance payments are deducted.

Let’s explain the difference between gross income vs net income for a business. If you are a business owner, you should deduct any business-related expenses from your gross income. This will determine the amount of your business’ net income.

Another thing that should be determined as the net income vs gross income difference is that your personal revenue will be equal to your total income less taxes and other work-related fees. This will constitute your net income.

Tags: [gross profit rate] [Gross income] [gross vs net] [adjusted gross income]

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