What is a gross income?

Gross income indicates all income that a person earns before the taxes are excluded from his payment. It is different from pure income, which is the amount of money one brings home. Gross income is used in several important calculations, such as determining the acceptable ratio of maximum debt to the person's intake when the individual attempts to qualify for a mortgage. For example, in the US, an individual must pay federal income tax, income tax and in some cases a local income tax. He is also obliged to pay social security taxes and Medicare to part of his income; For example, since 2010, individuals have been obliged to pay 6 percent of social security tax and another 1.5 percent in Medicare for the first $ 106,000 (USD) in income.

Depending on the tax group of the person, it may mean that they will eventually pay up to 42.5 percent of their taxes in taxes, provided that it is in the 35th Percential Tax band. While many individuals are in the lower tax band, the percentage cane be more than 25 percent of total money. This means that when it is said, it is hired for a job that pays $ 40,000 per year, in fact it does not bring home $ 40,000 per year.

In this example, the value of $ 40,000 per year is a gross income of an individual. This is the amount that the employer actually pays from his pocket to a worker. Since the IRS will decrease, the worker will not receive this full amount. The taxes are collected directly from each payout they receive, so that the net amount brings home - pure income - is lower than it would be if the taxes were not deducted.

Since the United States Tax System is a Pay-As-You-go system, deductions for taxes are discarded from every payout before Employee it sometimes sees it. Although most people quote their salaries in terms of gross income when they ask, the most important number is pure income because it is the amount of money that reallyHe sees in his checks, and the amount he actually has to spend on other needs. On the other hand, all money is paid for individuals for self -employed individuals; He then writes a check on his taxes quarterly or annually and can deduct the amount of the check he wrote to determine his net profit or income.