2.6 Gross Income

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Which of the following is considered as part of gross income?

• Gifts received from relatives

• Life insurance proceeds

• Salary from employment

• Loan proceeds

What is the primary difference between gross income and net income?

• Gross income is income before taxes, while net income is income after taxes

• Gross income is income after taxes, while net income is income before taxes

• Gross income is income after deductions, while net income is income before deductions

• Gross income is income before deductions, while net income is income after deductions

Answer explanation

Gross income is the total income earned before any deductions, while net income is the income after all deductions, including taxes and expenses. The correct answer is:

Which of the following sources of income is generally subject to federal income tax and should be included in gross income?

• Child support payments

• Welfare benefits

• Interest earned on a savings account

• Workers' compensation benefits

Answer explanation

Among the given options, interest earned on a savings account is generally subject to federal income tax and should be included in gross income. The correct answer is:

Roberto Alvarez is a teaching assistant. He earns $11.40 per hour. He is allowed to work fl exible hours. He was only able to work 32.25 hours last week. How much money did he earn?

(a)  

John earns a monthly salary of $3,000 and receives a monthly bonus of $500. What is his annual gross income?

• $36,000

• $42,000

• $54,000

• $60,000

Answer explanation

To find John's annual gross income, add his monthly salary and bonus, then multiply the sum by 12 months.

Annual gross income = ($3,000 + $500) x 12 = $3,500 x 12 = $42,000

Sarah's annual gross income is $48,000. If she earns 60% of her income from her job and the rest from her investments, how much does she earn annually from her investments?

• $19,200

• $28,800

• $29,000

• $30,000

Answer explanation

To find how much Sarah earns from her investments, first find the percentage of income she earns from her job.

60% of $48,000 = 0.6 x $48,000 = $28,800 (earned from her job)

Then, subtract this amount from her total annual gross income.

$48,000 - $28,800 = $19,200 (earned from her investments)

The correct answer is: a) $19,200

Tony earns an hourly wage of $25. If he works 40 hours per week for 52 weeks a year, what is his annual gross income?

• $50,000

• $52,000

• $58,000

• $60,000

Answer explanation

To find Tony's annual gross income, multiply his hourly wage by the number of hours he works per week and the number of weeks in a year.

Annual gross income = $25 x 40 hours x 52 weeks = $50,000

The correct answer is: a) $50,000

Emily has an annual gross income of $60,000. She contributes 10% of her income to a retirement account, which is not subject to federal income tax. What is her taxable gross income?

• $54,000

• $56,000

• $58,000

• $60,000

Answer explanation

To find Emily's taxable gross income, first calculate the amount she contributes to her retirement account.

10% of $60,000 = 0.1 x $60,000 = $6,000

Next, subtract this amount from her total annual gross income.

$60,000 - $6,000 = $54,000

The correct answer is: a) $54,000