Is Gross Income Before or After Taxes?

damircudic / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Gross income is your total earnings before taxes or deductions come out — it’s what you make, not what you take home. Whether you’re budgeting, filing taxes or applying for a loan, it’s important to understand the difference between gross income, net income and adjusted gross income (AGI).

In this guide, we’ll explain:

• What does gross income include
• How does it compare to net income and AGI
• How to calculate it for yourself
• Why it matters for taxes, loans and financial planning

Let’s start with the basics.

What Is Gross Income?

Gross income is your total earnings before anything is taken out. That includes federal and state taxes, Social Security, Medicare and other payroll deductions. Think of it as your “pre-tax income” — the amount you agreed to when you signed the job offer or freelance contract.

According to the Bureau of Labor Statistics, the median weekly gross income for full-time workers in the U.S. was $1,145 as of Q2 2024, which adds up to about $59,540 per year before taxes and deductions.

What’s Included in Gross Income?

It’s not just your paycheck. Here’s what typically counts toward your gross income:

Examples of Gross Income:

• Salary or hourly wages
• Overtime pay and tips
• Bonuses and commissions
• Side hustle or freelance income
• Rental property income
• Investment interest and dividends
• Royalties or alimony (in some cases)
• Business income (if self-employed)

If you’re self-employed, your gross income is your total business revenue before subtracting business expenses.

Is Gross Income Before or After Taxes?

Let’s answer this clearly: Gross income is always before taxes.

It’s the amount you earn before deductions like:

• Federal and state taxes
• Social Security and Medicare
• Retirement contributions (e.g., 401(k))
• Health insurance premiums

The IRS reported that 163.2 million individual tax returns were filed in 2023, and every one of them started with gross income.

Gross Income vs. Net Income: What’s the Difference?

Here’s the key: Gross income is what you earn. Net income is what you keep.

Gross Income:

• Before taxes and deductions
• Used for loan applications, tax brackets and employment contracts

Net Income:

• After taxes and deductions
• Used for personal budgeting and understanding actual cash flow

About 61% of Americans live paycheck to paycheck, so knowing your net income is essential for budgeting.

Gross Income vs. Adjusted Gross Income (AGI)

AGI is what the IRS uses to determine your eligibility for deductions and tax credits. It starts with gross income and subtracts specific “above-the-line” deductions like:

• HSA contributions
• Traditional IRA contributions
• Student loan interest
• Self-employment taxes
• Educator expenses

Example:

If your gross income is $70,000 and you contribute $3,000 to a traditional IRA and $1,500 to an HSA, your AGI is:

• $70,000 – $3,000 – $1,500 = $65,500

The average AGI in the U.S. was $74,198 in 2022, according to the latest IRS data.

How To Calculate Your Gross Income

Here’s how to figure it out based on how you earn:

For Employees:

Add up all income listed on your W-2 forms before any taxes or deductions.

Example:

• Base salary: $55,000
• Bonus: $2,000
• Side hustle income: $6,000
• Gross income = $63,000

For Self-Employed:

Add up all your business revenue, freelance earnings or consulting fees before subtracting business expenses.

Tip: Use tax software or IRS Schedule C to track income and expenses if you’re self-employed.

Why Gross Income Matters

Understanding your gross income is more than just helpful — it’s necessary.

Lenders use gross income to:

• Evaluate mortgage or auto loan eligibility
• Calculate debt-to-income (DTI) ratio

Employers may use it to:

• Determine salary bands
• Compare compensation offers

The IRS uses gross income to:

• Establish your filing requirement
• Determine eligibility for credits (via AGI)
• Set tax bracket thresholds

Mortgage lenders typically want your housing costs to be no more than 28% of your gross monthly income, according to the Consumer Financial Protection Bureau.

Final Take to GO: Is Gross Income Before or After Taxes?

Let’s wrap it up:

• Gross income is always before taxes and includes all your earnings
• Net income is what’s left after taxes and other deductions (aka your take-home pay)
• AGI is used on your tax return and subtracts certain allowable deductions
• Gross income matters when applying for loans, estimating tax brackets, or calculating your eligibility for tax credits
• Use net income for budgeting; use gross income for planning and paperwork

Understanding the difference between gross, net and AGI can help you avoid financial slip-ups — and plan smarter for your taxes, goals and future.

Information is accurate as of August 7, 2025.

Share This Article: