What Is Gross Monthly Income? | Definition & Simple Calculator
When you apply for a loan, submit a rental application, or even consider a new job offer, you’ll often be asked about your gross monthly income. This figure plays a key role in financial decisions because it shows how much you earn before taxes or deductions are taken out. Understanding what it means—and how to calculate it—can make a big difference in budgeting, borrowing, and planning ahead.
What Is Gross Monthly Income?
Gross monthly income refers to the total amount of money you earn in a single month before deductions like taxes, insurance, or retirement contributions.
Banks and lenders use it to decide how much you can responsibly borrow.
Landlords review it to check whether your income meets rent requirements.
Employers often share it in job offers so you can compare salary packages.
It’s essentially your “before-tax” paycheck expressed on a monthly basis.
How to Calculate Gross Monthly Income
The calculation depends on how you’re paid:
1. For Salaried Workers
Take your annual salary and divide it by 12.
Example: $72,000 ÷ 12 = $6,000 gross monthly income
2. For Hourly Employees
Multiply your hourly rate by the number of hours worked per week, then multiply by 52 weeks and divide by 12.
Example: $18 × 40 hours × 52 ÷ 12 = $3,120 gross monthly income
3. For Freelancers, Contractors, or Gig Workers
Add up your total annual earnings before taxes and divide by 12. If your income varies, use an average based on several months.
Example: $90,000 ÷ 12 = $7,500 gross monthly income
Gross Income vs. Net Income
It’s easy to confuse gross income with net income:
Gross income: total earnings before any deductions.
Net income: the actual amount deposited into your bank account after taxes and other withholdings.
For applications and loan approvals, gross income is the figure used. For day-to-day budgeting, net income gives you a more realistic picture of what you can spend.
Where to Find Your Gross Monthly Income
You can usually locate your gross monthly income in a few places:
Pay stubs – listed as “gross pay” before deductions.
Employment agreements – typically state your annual or monthly salary.
Tax forms – such as W-2s (employees) and 1099s (independent contractors).
Why Gross Monthly Income Matters
Understanding and reporting your gross monthly income is essential because it affects:
Loan and credit approvals – banks use it to calculate your debt-to-income ratio.
Rental applications – landlords often require renters to earn 2–3 times the monthly rent.
Government programs – eligibility for assistance often depends on gross income levels.
Financial planning – it gives you a starting point for estimating taxes and creating budgets.
If you require professional assistance with gross monthly income, reach out to Dimov Partners today. Our dedicated team is ready to present 360-degree expertise.
FAQs
What does gross monthly income mean?
Gross monthly income is the total amount you earn each month before any taxes or deductions are taken out.
Is gross monthly income before or after taxes?
Gross monthly income is calculated before taxes, insurance, and other deductions.
How do I calculate my gross income if I’m self-employed?
Add up your total earnings before taxes for the year (or an average period) and divide by 12 to get your gross monthly income.
Why is gross monthly income important for loans?
Lenders use your gross monthly income to measure how much debt you can afford and to calculate your debt-to-income ratio.
Does gross income include bonuses or commissions?
Yes, gross income generally includes salary, wages, bonuses, commissions, and other taxable earnings before deductions.