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Gross vs. Net Income

 

 

It is important to understand the difference between gross and net income. Your paycheck may show a lower take-home amount than what you expect from your salary or hourly wage. Knowing the difference between the two will help when planning your expenses.

Gross Income

Gross income is a person’s total income earned before taxes and other deductions. Earned income includes salaries, wages, bonuses, tips, and self-employment income.

Net Income

Net income is a person’s income earned after deductions and taxes. Net income is the percentage of take home pay from each paycheck.

Statutary Withholdings on a paycheck include:

  1. Federal Income Tax
  2. Social Security Tax
  3. Medicare Tax
  4. State and Local Income Tax

There are other deductions that impact your net income that may include:

Health                
Dental                
401k                
Flexible- Dependent Care                
Flexible-Medical

How you adjust your withholdings has a direct impact on your paycheck. Be sure to review the federal and state withholding forms and apply accordingly. The more money that is withheld from your paycheck, the smaller the paycheck. The less money that is withheld from your paycheck, the larger the paycheck. Make the best use of your money, and have the right amount of tax withheld.

American Consumer Credit Counseling (ACCC) offers non-profit credit counseling and debt relief programs for consumers nationwide who find themselves drowning in debt and wondering "How do I get out of debt?" Our certified credit counselors have helped thousands of individuals and families learn how to reduce credit card debt and get out of debt through a variety of credit reduction strategies. Our credit card debt consolidation and debt management plans help achieve credit card relief by consolidating credit cards payments to pay credit card debt down more quickly. We also offer bankruptcy counseling, housing counseling and other financial education services.

American Consumer Credit Counseling - Consolidate Debts - Better Business Bureau American Consumer Credit Counseling - Consolidate Debts - Mass Housing Approved National Industry Standards for Homeownership Education and Counseling American Consumer Credit Counseling - Consolidate Debts  - Council on Accreditation American Consumer Credit Counseling - Consolidate Debts  - NFCC Member