However, for many of us, our gross income is the same as what we intuitively think of as our income.
Likewise, if you invest in bonds issued by your state or its agencies, the income from those bonds aren’t taxable. However, the term “gross income” is actually a bit narrower than that because some income is partially or fully tax-free, and so it is excluded from taxation and excluded from “gross income.” For example, if you are retired and receiving social security, a portion of your social security payments is not taxable.
Most people have an intuitive understanding of the term income: it is the money that comes into your hands each year. With several different types of income in the world of taxes, you may be asking yourselves what is adjusted gross income and what are the differences between other types of income? Certain tax deductions and credits such as the Child Tax Credit and the Earned Income Tax Credit are not solely based on your income but your adjusted gross income. Many benefits are limited to those people whose income is below a certain level.
