Gross income

Gross income is everything when filing taxes and obtaining tax deductions. Gross income is also used in many financial projections and analysis. For a home based business owner, gross income is used to calculate taxes and adjusted gross income which are necessary to calculate tax benefits. The definition of gross income is pre tax sales less cost of sale in accounting terms. Gross income is sometimes referred to as gross profit.

Gross income

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Pre tax Sales

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Cost of Sale

What Is Gross Income for a home based business?

For purposes of limiting home office deductions, gross income is income from the home business activity conducted in the home office.

Example of gross income

A teacher who teaches full-time at school has a home business where she conducts a retail business from a home office. For purposes of limiting home office deductions, gross income includes only the income from the retail business, not the teaching income.

How to calculate gross income?

To calculate gross income, look to:

• your profit reported on Schedule C of your tax return if you are self-employed, or
• the portion of your salary earned in the home office if you are an employee.

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