The difference between gross and net income is that gross income is the total amount of income made and net income is the total amount of income made after taxes and other expenses have been subtracted. The total gross income or gross amount can refer to total profit or total sales.Know More
Salaried employees are taxed on their gross income while businesses and self-employed people are taxed on their net income. This was established in the Income Tax Act of 1961 for the United States. The net income expenses can include selling, general and administrative expenses as well as interest payments.
The term "gross margin" is equal to the gross income as a percentage or revenue whereas the net margin is equal to the net income as a percentage of revenue. Net income is sometimes referred to as "the bottom line" because net income is always listed at the bottom of an income tax statement. In the United Kingdom, net income is also known as "profit attributable to shareholders."
An example of net income and gross income would be a self-employed businessman. Say he makes $50,000 for the year, but he has $20,000 in deductions (expenses) and credits. This means that he has a taxable income of $30,000. Then his income tax of $5,000 will need to be subtracted to arrive at $25,000. So, $25,000 is his net income and $50,000 is his gross income.Learn More
The difference between net pay and gross pay is the amount that is taken out of the wages for taxes, benefits and other voluntary deductions. Net pay is the amount that an employee takes home after deductions. Gross pay is the amount that the employee actually earns.Full Answer >
The U.S. Internal Revenue Service describes 403(b) retirement plans as plans that allow an employee to defer a percentage of his pre-tax income into an account where taxes remain deferred until distribution. These plans work similarly to the 401(k) plans offered by for-profit organizations, but 403(b) plans are only available to employees of public education systems, churches and tax-exempt charities and non-profits.Full Answer >
Some reasons people make early withdrawals from their IRAs include disability, death of the IRA owner, medical expenses, purchase of a first home, costs of higher education, active military duty, payment of health insurance premiums during unemployment and payment of back taxes to the IRS. The IRS excuses the early distribution tax penalty for these withdrawals. Other reasons include a falling stock market, the payment of debt and early retirement.Full Answer >
Capital income is income generated by an asset over time, rather than from work done using the asset, according to Investopedia. If a farmer buys land for a certain amount of money and sells it at a profit after one year, the difference in the prices is capital income.Full Answer >