Gross income actually represents the sum of money that people make without paying taxes or social contributions. The level of taxes applied on gross income is established by the United States tax law, within this country. Variations and different definitions on gross income can be found depending on the state, country or even area you may be interested in. Below you can find a list of the most frequently asked questions on gross income. By learning their answers you will be able to understand all there is to know about gross income, taxes and general income.
1. What is gross income?
Naturally, the first question you will be interested in is what is gross income. Gross income includes all income from whatever sources. It is not limited to cash, including all type of income, regardless of its provenience or form. It can easily be described as all income from whatever source derived, unless excluded by law. Under the terms of the law, there are certain types of income that are not listed as gross income.
2. What is income?
Now that you have a better idea on what gross income means, you should be certain that you know for sure what income includes. For starters, you should know that all residents of the United States are subject to tax, under the terms of the law. This includes individuals, corporations, estates, members of partnerships, but also other type of beneficiaries. Non-residents may be taxable on their US source income only. Taxable income is formed by gross income less allowable tax deductions.
Taxable income can include the following:
- Gross profit;
- Distributive share of partnership;
- Income from any other sources.
3. What are income taxes?
One of the most important things you should know about income is that it always is taxable. Regardless of the type of income we may be referring to, unless there are no deductions or exceptions under the terms of the law, it is taxable. However, tax levels applied on different types of income can vary a lot. The type of income, as well as the sum and its source, are important factors in establishing tax levels.
So, as already mentioned gross income commonly includes all type of income, unless there are exclusions applied. This means that there are certain types of income which are excluded from gross income. They may include exempt income, exclusions or tax inclusions. Social security benefits, gifts and inheritances may also be listed here, as well as life insurance proceeds, compensation, scholarships, certain employee benefits and gains.