Tax Glossary
Key Tax TermGross Income
Gross income is the total amount of money you receive in a year before any taxes, deductions, or adjustments are taken out. It includes wages, business income, investment income, and certain benefits. Your gross income is the starting point for determining your AGI and taxable income.
💡Simple definition
Gross income means all the money you earn from all sources before anything is taken out. It's the IRS's starting point for calculating your tax obligations.
✅What counts as gross income?
Gross income includes money from many sources, such as:
- ✓Wages and salaries (W-2 income)
- ✓Tips and commissions
- ✓Self-employment or freelance income
- ✓Interest and dividends
- ✓Capital gains
- ✓Rental income
- ✓Business income
- ✓Unemployment benefits
- ✓Taxable Social Security benefits
- ✓Alimony received (pre-2019 divorce agreements)
❌What does NOT count as gross income?
These items are NOT included in gross income:
- ✗Child support
- ✗Life insurance payouts
- ✗Gifts and inheritances
- ✗Workers' compensation
- ✗Most employer-provided health insurance
- ✗Employer retirement contributions
⭐Why gross income matters
Gross income is the foundation of your tax return. It determines:
- •Your Adjusted Gross Income (AGI)
- •Your taxable income
- •Eligibility for credits and deductions
- •Your tax bracket
🧮Quick example
Imagine you have the following income:
- •$50,000 salary
- •$1,200 bank interest
- •$3,000 freelance income
Gross income = $50,000 + $1,200 + $3,000 = $54,200
🔄Gross income vs. AGI
Gross income is only the starting point. The IRS then subtracts certain allowable adjustments—like student loan interest, retirement contributions, or half of your self-employment tax—to calculate your:
→ Gross Income − Adjustments = Adjusted Gross Income (AGI)
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