Gross Income vs. Net Income

Gross income is the full amount you earn before anything is taken out: your stated salary, or the total of an hourly wage times hours worked. Net income, sometimes called take-home pay, is what's actually deposited into your bank account after taxes and other deductions are subtracted.

The gap between the two is generally made up of income tax withheld, and often other deductions too: retirement contributions, health insurance premiums, and other benefits, depending on where you live and work. This is exactly why a $60,000 salary doesn't mean $60,000 shows up in your account over the year.

Gross income:        $60,000
Minus taxes/deductions: −$14,000  (illustrative)

Net income (take-home): $46,000

The amount actually deposited into your account after taxes and deductions are subtracted is called ____ income.

This distinction matters most when budgeting: a common early-career mistake is planning a budget around gross salary, then being surprised that far less actually arrives. Every budget, including the ones covered in the Money Basics track, should be built around net income, since that's the number that's actually available to spend or save.

Why should a personal budget be built around net income rather than gross income?

Net income is generally the same number as gross income.