Annual income is the total amount of money earned during one year. It includes all sources of income, such as salary, wages, bonuses, commissions, and other payment sources such as Social Security. Annual income is typically used for salaried employees with more predictable annual earnings. It is important to know your annual income for tax purposes, applying for a loan, and making a new company budget.
Annual income can be expressed as annual gross income or annual net income. Gross annual income is what you receive before taxes and other deductions, while annual net income is the amount that’s left after taxes and other deductions are taken out. To calculate annual income, you can multiply your gross pay by the number of pay periods you have in a year. Alternatively, you can divide the gross pay by the number of months worked to determine the monthly income and then multiply the monthly income by 12 to get the annual income. If you start a job partway through the year, your annual salary will be prorated, which means your salary will be reduced.
