# What Is Gross Annual Income and How Do I Calculate It?

Gross annual income is the sum total of all income earned in a given year for an individual or a company.

When you receive consistent payments each month, you can calculate your gross annual income by multiplying your monthly income by 12. Be sure you are using your gross income for the month and not your net income, as in before any deductions.

Those formulas are:
1. Hourly rate x 2000.
2. Daily rate x 250.
3. Weekly rate x 50.

## Why it’s useful to find annual gross income

Its important to know your annual gross income because you use this number when making major financial decisions. By knowing your annual income, you can create a more accurate budget, which then allows you to have a healthier financial life.

Knowing your annual income is also important when you apply for loans or a credit card. Loan agencies use your annual income to help them determine how much you can borrow, if any, and what sort of interest rate you are eligible for.

Lastly, you need to report your annual gross income on your taxes each year. Knowing this number allows you to accurately report your taxes and ensure that you are paying the correct amount owed.

## What is annual gross income?

Annual gross income is the amount of money you earn in one fiscal year before any deductions. Your annual gross income is the amount of money you receive, not just money from your job. For example, annual gross income can include any of the following:

## AGI vs. net annual income

Annual gross income, or AGI, is sometimes confused with net annual income. While AGI is the amount of money you receive in a fiscal year, your net annual income is the amount left after taking deductions into account.

For example, someone with a gross annual income of \$100,000 and a tax rate of 25% would have a net annual income of \$75,000. Its important to know the difference between the two because you use net income when creating your budget and making purchasing decisions. If you use the gross annual income for this, you may end up spending money that you dont have.

## How to calculate your annual gross income

Here are a few simple steps you can follow to help you determine your own annual gross income:

### 1. Determine how youre paid

The first thing to figure out is whether you receive pay by the hour or by the year. If your pay is the same amount each time you receive a paycheck, then you are a salaried employee. This also applies to things like pension whereby you receive the same amount each time. Figuring out your annual gross income is fairly simple in these scenarios, and the formula is in the below steps.

However, if your income fluctuates based on the hours you worked, or if youre an independent contractor that charges different amounts for each job, then youll need to use a different formula.

### 2. Calculate consistent payments

When you receive consistent payments each month, you can calculate your gross annual income by multiplying your monthly income by 12. Be sure you are using your gross income for the month and not your net income, as in before any deductions.

You can calculate your gross annual income using other measurements besides monthly income if necessary. Those formulas are:

Salaried employees also have another option for figuring out their gross annual income. This information may appear right on the pay stub or on the documentation you received when you accepted the job offer. If you no longer have the documents you signed when agreeing to the job, talk to someone in your office who can get you a copy of them.

### 3. Calculate hourly payments

If your payments are inconsistent, youll need a different formula. An easy way to do this is:

(Estimated number of hours worked per week) x (hourly rate) x 52 = gross annual income

The 52 represents the number of weeks you work throughout the year. If you work fewer weeks, you want to use that number instead.

For example, if you work roughly 35 hours per week every week, and you earn \$16 per hour, your gross annual income would be:

35 x 16 x 52 = \$29,120

When your income can fluctuate, its challenging to determine how much you will earn for the year. However, in many scenarios where you need to supply your gross annual income, a close estimate will suffice. You can then figure out the exact amount you earned at the end of the year when it comes time to do your taxes.

### 4. Add in other factors

Some people may have more complicated situations than the ones mentioned above. For example, you may have two part-time jobs: one that pays salary and another that pays by the hour. You may also have income from things like investments or a pension.

You should factor in all the money you receive when calculating your gross annual income. Using a combination of the formulas mentioned above, you can estimate your gross annual income regardless of the number of income sources.

### 5. Calculate annual net income

Once you have your estimated gross annual income, you may want to figure out your net annual income. To do this, there are two methods.

The first option is to subtract any deductions from your gross annual income. Deductions include things like taxes or child support. The other option is to take the deductions out from your earnings before you calculate your gross annual income. If you add up all your earnings after deductions, this is your net annual income.

To convert from your net annual income to your gross annual income, you can use this simple formula:

Net income / (1 – deduction rate)

For example, if your net income was \$29,750 and you know your tax rate is 15%, you can complete the equation as follows:

\$29,750 / (1 – 0.15) = \$29,750 / 0.85 = \$35,000

## FAQ

What is annual gross income example?

What is gross annual income? An individual’s gross annual income is the amount of money made within one year before deductions. For example, when an employer pays you an annual salary of \$50,000 per year, this means you have earned \$50,000 in gross pay.

How do you calculate gross annual income from biweekly pay?

Multiply your bi-weekly pay by the number of paychecks you will receive in the year. Annual Salary = (bi-weekly pay) x (number of paychecks in a year) For example, if you get paid \$671.00 bi-weekly and will receive 26 paychecks, your annual salary would be \$671.00 x 26 = \$17,446.