Gross income

How it works

For a salaried job, gross income is the annual salary, which payroll divides across the pay periods in the year. For hourly work, it is the hours you are paid for multiplied by your rate, plus any overtime, commissions or bonuses. At $25 an hour, 40 paid hours a week for 52 weeks comes to $52,000 a year. Income from other sources, such as interest or a side job, adds to your total gross income for the year.

Many money figures start from gross income. Job offers and raises are usually quoted as gross amounts, and lenders often measure a debt-to-income ratio by dividing your monthly debt payments by your gross monthly income. A budget needs a different number, though. Taxes, benefit costs and retirement contributions come out first, so planning your spending around gross income would count money that does not reach your account.

When you compare income figures, check two things: whether each one is gross or net, and whether it covers a paycheck, a month or a year. A pay schedule changes the size of each paycheck without changing the salary. If part of your income is irregular, such as overtime or freelance work, listing it separately keeps a strong month from being mistaken for a typical one.

Related terms

Sources and further reading

• CFPB: What is a debt-to-income ratio?
• IRS: Definition of adjusted gross income

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.