Gross Income

Gross income is the widest measure of what you earned in a tax year, before the tax code allows you to subtract anything. It includes wages and salaries from a W-2, self-employment and freelance earnings, interest, dividends, capital gains, rental income, and most other money that comes in, unless a specific provision of the tax code excludes it. A short list of items — gifts, inheritances, municipal bond interest, certain life insurance proceeds, and employer-paid health insurance premiums — never enter gross income at all, so they never even become the starting point for any later calculation.

You do not report a single gross-income figure on a dedicated line the way you do with AGI or taxable income; instead, gross income is built up from the individual income lines on the front of Form 1040 — wages, interest, dividends, business income from Schedule C, capital gains from Schedule D, and so on — plus whatever supporting schedules those lines pull from. Once every source is added together, that total becomes the starting point from which above-the-line deductions are subtracted to reach AGI, and eventually the standard or itemized deduction is subtracted to reach taxable income.

A common mistake is assuming that money you never see in your bank account, like employer 401(k) matching contributions or health insurance premiums your employer pays directly, must count as gross income — it generally does not, because the tax code carves those out at the source. Self-employed taxpayers also need to remember that gross income for tax purposes is not the same as gross receipts; business expenses reduce net self-employment income before it flows into gross income, they are not treated as a later deduction from a full gross-receipts figure the way an employee's wages would be.