What is the difference between gross income and net income?

Gross income refers to the total earnings or revenue that an individual or entity receives before any deductions are made. This includes all forms of income such as wages, salaries, bonuses, rental income, and any other sources of income. In contrast, net income is the amount of money that remains after all deductions, such as taxes, insurance, and retirement contributions, have been subtracted from gross income. Therefore, describing gross income as total earnings before deductions accurately captures its definition and distinguishes it from net income. Understanding this distinction is crucial in personal finance as it helps individuals manage their budget based on the income they actually take home versus their total earnings.