For U.S. federal income tax purposes, gross income generally means income from whatever source derived, except where the tax code provides otherwise. It can include wages, business income, interest, rent, dividends, pensions and gains from property—not just a paycheck. Gross income is also different from adjusted gross income (AGI) and taxable income.
What counts as gross income?
The federal tax definition appears in 26 U.S.C. § 61: “Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items.” The statute’s list is illustrative, not exhaustive, and the opening qualification matters: other provisions of tax law can exclude or treat particular receipts differently.
Examples named in the statute include:
- Compensation for services, such as fees, commissions and fringe benefits
- Income from a business and gains from dealings in property
- Interest, rents, royalties and dividends
- Annuities and pensions
- Income from discharge of indebtedness
- A partner’s distributive share of gross income, income in respect of a decedent, and income from an estate or trust interest
The IRS also identifies wages, salaries, tips, stock options, commissions and fees as examples of compensation. Whether a particular payment is taxable depends on the rules that apply to it; a listed example is not a substitute for checking those rules. The IRS explains that some income is taxable and some is nontaxable in its taxable and nontaxable income guidance.
Gross income, AGI and taxable income are different
These terms describe different stages in the federal income tax calculation. The IRS describes AGI as beginning with gross income and subtracting certain adjustments. AGI is calculated before the standard or itemized deduction. The IRS’s AGI definition gives examples of income sources such as wages, tips, interest, dividends, capital gains, business income and retirement income.
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| Measure | What it means | What has been applied |
|---|---|---|
| Gross income | Income included under the relevant federal tax rules | Before the adjustments used to calculate AGI |
| Adjusted gross income (AGI) | Gross income after certain permitted adjustments | Before the standard or itemized deduction |
| Taxable income | A later measure used in the tax calculation | AGI is reduced by the applicable deduction and any other relevant adjustments |
Do not use the three labels interchangeably. A number described as gross income is not necessarily the amount on which tax is ultimately calculated.
Why business and rental income can be calculated differently
“Gross income” does not always mean adding every dollar received or subtracting every expense at the same point. The relevant calculation depends on the type of income and the context in which the IRS is discussing it.
Business income
In the business contexts described in IRS Publication 17 (2025), Your Federal Income Tax, gross income can be calculated as net sales less cost of goods sold, plus certain other income. That measure is not automatically the same as gross receipts or net profit. The distinction matters when comparing a business figure with an individual’s gross income.
Rental income
For its discussion of rental income, Publication 17 treats gross receipts as gross income before rental expenses are deducted. Do not assume that the business example’s cost-of-goods-sold treatment applies to rental receipts.
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This article explains the term in the context of U.S. federal income tax. State and local taxes, non-U.S. tax systems, loan applications and benefit programs can define or calculate gross income differently. Check the instructions for the specific return, form, loan or eligibility test rather than assuming the federal tax definition controls.
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