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What Are Gross Earnings?

Gross earnings refer to the amount of money made by an individual or a company before taxes and other deductions are subtracted from it. This is the general definition of the term, but it must be noted that other factors may come into play, changing the specific definition of gross earnings. In essence, depending on the context, the exact meaning of gross earnings may change.

Taking a look at individual earnings first, in some cases, there might be a slight change in the calculation of gross earnings. For example, if an individual has a retirement fund, or something similar, the taxable income (money that is subject to tax payment) is lowered. Sometimes, this is considered as the same as lowering the gross earning. Sometimes, it is not. Bottom line: an individual’s gross earnings consist of all the money made.

For corporations or businesses, things are a little simpler. All the money that comes in at the end of the year - minus operating expenses such as rent, wages, and utilities - is considered as the gross earnings. This remaining amount is then what qualifies for taxation.

Gross earnings play a significant role when an individual applies for a loan or engages in some other financial transaction. More often than not, the information required is the figure for the gross earning. While this can be beneficial - the figure is always higher - it can also be misleading. Individuals working on a budget simply need to bear in mind that budgets work around net pay - actually money “taken home” - rather than gross earnings.

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