Which statement best defines gross income versus net income?

• A. Gross income is total earnings before deductions; net income is take-home pay after taxes, employee benefits contributions, and other deductions.
• B. Gross income equals after-tax earnings.
• C. Net income is pre-tax amount.
• D. Gross income includes only salary, not benefits.

Answer: (A)

Understanding how gross and net income relate helps in budgeting and tax planning. Gross income is the total earnings before any deductions are taken out—this includes salary, wages, bonuses, and other compensation. Net income is what remains after those deductions have been subtracted—the take-home pay after taxes, employee benefit contributions, retirement contributions, and other withholdings. The statement is the best because it clearly ties gross to total earnings before deductions and net to take-home pay after deductions. The other ideas mix up the terms—net is not after-tax earnings only, gross is not limited to pre-tax amounts, and gross can include more than just salary (like bonuses and other compensation).