Gross income, in general, refers to all the income added up. This income includes all income from all sources, may it be from salaries, sales, gifts, etc. The gross income is not limited to cash received, so that the value of non-cash income is simple added to the gross income. The gross income is the basis for computing tax.
Sources of income included in computing gross income include the following:
1. wages or salaries – This includes not just regular salaries but all wages, including tips and commissions.
2. interest – This included interest from savings, investments, and below market gift loans.
3. dividends
4. profit from sales – When computing this, it is important that the cost of the goods sold must be subtracted from the total profit.
5. property gains – You only compute property gains when you dispose of your property. Paper gain is not included since you did not earn any income yet and the gain could turn into loss in time. Property gains from the sale of personal residence not exceeding the specified limit by the law is not included.
6. rents and royalties
7. alimony
8. pensions, annuities, and any insurance income
9. income from shares
10. tax refunds – This applied to past deductions.
Some sources of income are tax exempt, which means that it shouldn’t be added to the computation of gross income so that they won’t be taxed. Examples of such sources of income include social security benefits, life insurance proceeds, compensation for injuries, scholarships, and more. Note though that exemptions differ in each country.
