## Definition of Gross Income

To determine gross income add up all the earnings made in a year. That’s because gross income includes the total earnings an individual makes in a year, not including any deductions. For a business, gross income is the total annual earnings they are scheduled to make in a fiscal year based on the operation of the company.

### Why is this term important?

There are a variety of sources that determine a person’s gross income, including salary, hourly wages, additional tips, investments, and beyond. It is vital that you are aware of all earnings that can add or subtract from your gross income. Knowing your gross income can help to determine how much mortgage or loan you are capable of taking on by lenders.

### Examples of term

If you are paid an annual salary, you can determine your gross monthly income by dividing your annual salary by 12. If you are an hourly paid employee, you can determine your gross monthly income by multiplying your hourly pay by hours/week, then multiply by 52 and divide by 12.

Example of gross monthly income for annual wage: $45,000 / 12 = $3,750

Example of gross monthly income for hourly wage: $21 x (40/1) x 52 / 12 = $3,640