We receive advertising fees from the brands we review that affect the ranking and scoring of such brands.
Advertiser Disclosure

What is Gross Monthly Income

Matthew Levy Updated: June 26, 2023 • 3 min read

The gross monthly income is the amount of money you make in a given month before any deductions, taxes, or other expenses. It may comprise overtime pay, bonuses, and commissions in addition to the base salary. Your gross income serves as the basis for your tax return.

What should be included in gross monthly income

Some individuals may have additional monthly sources of income in addition to their hourly or wage income. These extra income-generating activities may include:

  • Business income
  • Additional earnings from a second or third occupation
  • Overtime
  • Rental income
  • Commission
  • Investments
  • Bonuses

In other terms, gross income is the whole amount of money earned during a specified time period. This includes revenue from a salary, bonuses, commissions, a side gig, freelance work, or any other source, such as social security. Depending on the circumstances, it may also include dividends, interest, and capital gains.

How does the gross annual income impact you

Annual gross income is crucial to achieving your financial goals. For instance, if you are seeking a mortgage, your gross income is essential to determining how much you can borrow. Mortgage lenders and landlords judge your financial stability based on your gross income. Lenders are interested in the proportion of your income that will go toward a mortgage payment.

In addition, knowing your gross income can help you determine how much to save for retirement as a gauge of your financial situation and ability to set money aside.

Gross vs. Net income

Gross income is the sum of all revenue sources, whereas net income is what remains after all deductions. In other words, your net income is your "take-home pay," or the amount remaining in your paycheck after the following deductions have been made:

  • Income tax
  • Social security
  • Health insurance and health savings accounts (HSA)
  • IRA, 401(k), or retirement contributions
  • Any other legally mandated payments (loan or mortgage repayments, child support, alimony, etc.)

In mathematical terms, this gives the following formula:

Net income = Gross Profit — Operating Expenses — Other Business Expenses — Taxes — Interest on Debt + Other Income

How to calculate yearly gross income

In the event that you are paid on an annual basis, the math is rather straightforward. To reiterate, gross income is the total amount you receive before taxes, and other deductions are taken out of it. This is the amount that is typically described as an annual salary. Just divide the entire amount of money you receive during the year by the number of months in the year:

Annual salary / 12 = Gross Income Per Month

Assuming you earn $60,000 per year, applying the above formula would result in a monthly gross income of $5,000.

For many people, however, this formula is not applicable since they are paid by the hour. In this case, here is the formula:

(Hourly pay) X (Hours/week) X 52 /12 = Gross Income Per Month

The number 52 refers to the total number of weeks in which you are employed during the year. If you work fewer weeks, you should use this number rather than the previous one.

If you work approximately 29 hours per week, every week and make $26 per hour, the following is an example of how much your gross annual income would be each month:

26 × 29 x 52 /12 = $3,267.3.

It may be challenging to estimate how much money you will make over the course of a year if your income is subject to variations. However, in most situations in which you are required to supply information about your yearly gross income, an approximate estimate will do. When it comes time to file your taxes at the conclusion of the year, you will have the ability to ascertain the precise sum that you earned.



Understanding your finances and how they are defined is essential. Lenders and landlords evaluate your gross income to assess what you can afford. Therefore, properly evaluating and calculating your gross income can result in tax savings.

If you have issues or doubts regarding your finances or taxes, you should consult a financial counselor or tax expert. It is crucial to know about your own money and recognize when you need assistance with them.

Article Topics

Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.