Gross income refers broadly to any income an individual or company receives except that which is excluded by the internal revenue code (IRC) such as gifts and child support.
For individuals, gross income refers to the broad total of all income sources for the taxable year which above-the-line deductions are subtracted from to get a person’s adjusted gross income. Gross income includes essentially all income such as from wages, dividends, alimony, capital gains, and pensions. Many deductible items such as for charity still must be included in gross income. Deductions are applied after calculating gross income.
For businesses, gross income refers to all of the revenue for the tax year minus the cost of goods sold. For example, if XYZ Co. had 1 million in revenue in 2020 from goods with costs being $750,000, XYZ Co. would have $250,000 in revenue. Complex rules govern how businesses determine what is included in the costs of goods and this is the subject of much litigation.
[Last updated in January of 2022 by the Wex Definitions Team]