Gross vs. Net Income

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What is the difference between gross vs. net income? 

As the word “versus” implies, gross vs. net income refers to a comparison between gross income and net income. For individuals, these two are significant in understanding how much you earn (gross income) and how much you get to take home after taxes and deductions (net income). If you take a close look at your paystub, you will find these two figures along with the calculation in between. 

How is gross income computed? 

Your paystub will indicate your gross income and outline the different sources. This can be income from your regular wages, bonus, commissions, and other sources. Once you understand your gross income, don’t stop there. Please note that this is not the amount that you will take home. In the next part, let’s move on to the deductions. 

What are income deductions? 

Now that you know what your gross income is, the next important thing is to calculate your net income. This is what is left of your income after mandatory payroll taxes and applicable deductions are taken out. These are the deductions that you can expect:

A paystub should have an outline of all applicable deductions and the specific amount for each one. This way, you can get the total deductions to be made and subtract this from the total gross income. What you will get is the net income of the employee. 

For employees, gaining clarity on these things will empower you to check your pay stub each time and have an understanding of your hard-earned money. 

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