tax
Gross Income
Gross income is your total income before any taxes, deductions, or withholdings. It is the starting figure used by lenders for DTI calculations and by tax authorities to determine your tax bracket.
For employees, gross income typically includes salary or wages, bonuses, and other cash compensation. It does not include employer-paid benefits.
Adjusted gross income (AGI) in the US is gross income minus certain "above-the-line" deductions (student loan interest, IRA contributions, self-employment taxes). Taxable income is AGI minus the standard deduction or itemised deductions.
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- Net Income (Take-Home Pay)
- Net income is your earnings after all taxes and deductions have been removed. It is the amount that actually lands in your bank account — also called take-home pay.
- Effective Tax Rate
- Your effective tax rate is your total tax paid divided by your total income, expressed as a percentage. It is always lower than your marginal rate in a progressive tax system.
- Debt-to-Income Ratio (DTI)
- The debt-to-income (DTI) ratio is your monthly debt payments divided by your gross monthly income, expressed as a percentage. Most lenders require a DTI below 43% to qualify for a mortgage.
Frequently asked questions
What is Gross Income?
Gross income is your total income before any taxes, deductions, or withholdings. It is the starting figure used by lenders for DTI calculations and by tax authorities to determine your tax bracket.