What is the difference between gross income and net income?

Gross income refers to the total earnings an individual receives before any deductions or expenses are subtracted. It includes all sources of income, such as wages, salaries, bonuses, and rental income. Net income, however, represents the amount of income left after subtracting all deductions, expenses, and taxes from gross income. Deductions can include contributions to retirement plans, healthcare costs, and business expenses. Taxes that are typically deducted from gross income include income tax, Social Security, and Medicare. Net income reflects the actual amount a person takes home or retains after all expenses and deductions. It is important to understand the difference between gross and net income as it affects tax liability and financial planning.