Is Gross Income Before or After Taxes?
Written by
Rudri Bhatt Patel, CFHC™
Edited by
Melanie Grafil, M.A., CHFC™
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Gross income is income before taxes — 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).
This guide will go over:
- What gross income includes
- How does it compare to net income and AGI
- How to calculate it for yourself
- Why it matters for taxes, loans and financial planning
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 $1,214 as of Q3 2025, which adds up to about $63,128 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?
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
| Term | Definition | Example |
| Gross Income | Total income before taxes and deductions | $5,000 per month salary |
| Net Income | Take-home pay after taxes and deductions | $3,750 per month after payroll taxes |
| Adjusted Gross Income (AGI) | Gross income minus certain IRS deductions | $60,000 – $2,500 IRA = $57,500 AGI |
The IRS reported that 165.8 million individual tax returns were filed in 2025, and every one of them started with gross income.
Gross Income vs. Net Income: What’s the Difference?
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
How To Calculate AGI
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 between mid-$70,000 to low $80,000 in 2023, 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?
To sum it all up, here are the biggest takeaways:
- Gross income is always before taxes and includes all your earnings
- Net income is what’s left after taxes and other deductions — also known as 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.
FAQs About Gross Income
Here are the answers to some of the most frequently asked questions about whether gross income is before or after taxes and how it works:- Is gross income before or after taxes?
- It’s always before taxes. Gross income is your total earnings before anything is withheld.
- Is gross income the same as taxable income?
- Not quite. Taxable income comes after adjustments and deductions -- it’s what the IRS uses to determine your final tax bill.
- Why do banks ask for gross income?
- Lenders prefer a standard, pre-tax number to calculate affordability across borrowers.
- Can I find my gross income on my pay stub?
- Yes. Look for the “gross pay” line -- that’s your total income before deductions.
- What’s the difference between AGI and taxable income?
- AGI is gross income minus IRS-allowed deductions. Taxable income is AGI minus standard or itemized deductions.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.
- IRS "Definition of adjusted gross income."
- ADP "Gross pay vs. net pay: What’s the difference?"
- U.S. Bureau of Labor Statistics "USUAL WEEKLY EARNINGS OF WAGE AND SALARY WORKERS SECOND QUARTER 2025"
- IRS "SOI Tax Stats - Individual Income Tax Returns Line Item Estimates (Publications 4801 and 5385)"
- CNBC "61% of Americans say they are living paycheck to paycheck even as inflation cools"
- Allstate "How much house can I afford?"
- IRS "Guide to business expense resources"
