Gross vs net income

Front

What is Gross Income?

Back

The total amount earned before any deductions like taxes and payroll are taken out.

Front

What is Net Income?

Back

The amount of money left after all deductions, including taxes, have been subtracted from gross income.

Front

How is Gross Income calculated?

Back

Gross Income is calculated by adding up all earnings before any deductions.

Front

How is Net Income calculated?

Back

Net Income is calculated by subtracting taxes and other deductions from Gross Income.

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Why is Net Income important for budgeting?

Back

Net Income is important for budgeting because it represents the actual amount of money available to spend or save.

Front

What does it mean to have a higher Gross Income?

Back

A higher Gross Income means you earn more money before any deductions, but it doesn't reflect how much you actually take home.

Front

What deductions are typically taken from Gross Income?

Back

Common deductions include federal and state taxes, Social Security, and health insurance premiums.

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Can you have a high Gross Income but a low Net Income?

Back

Yes, if deductions are high, you can have a high Gross Income but still take home a low Net Income.

Front

What is the relationship between Gross and Net Income?

Back

Net Income is derived from Gross Income after all deductions are made.

Front

Why might someone focus on Net Income instead of Gross Income?

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Focusing on Net Income is important for understanding actual financial health and spending power.