Which income is calculated before any deductions?

• A. Net income
• B. Capital gains
• C. Gross income
• D. Disposable income

Answer: (C)

Gross income is the total income earned by an individual before any deductions or taxes are applied. This includes wages, salaries, bonuses, rental income, dividends, and any other sources of income. Understanding gross income is fundamental in personal finance because it represents the starting point for calculating taxes and determining budgets.

In contrast, net income refers specifically to the amount remaining after all deductions, including taxes and other withholdings, have been subtracted from gross income. Disposable income is the amount left after taxes have been accounted for, which is available for spending or saving. Capital gains refer to the profit made from the sale of an asset, such as stocks or real estate, and are a specific type of income rather than a measure of overall earnings. Therefore, the correct understanding of gross income is crucial for financial planning and management.