What Is Gross Monthly Income? | Definition & Simple Calculator

When you’re applying for a loan, filling out a rental application, or reviewing a job offer, one of the first numbers you’ll see is gross monthly income. Lenders, landlords, and financial institutions often use it to determine your eligibility for credit, housing, or other financial opportunities. But what exactly does it mean, and how do you calculate it?

What Is Gross Monthly Income?

Gross monthly income is the total amount of money you earn in one month before any deductions—like taxes, Social Security, health insurance, or retirement contributions—are taken out:

• Lenders use it to measure whether you can afford a mortgage, car loan, or credit card.
• Landlords look at it to see if your income is high enough to cover rent.
• Employers may present it in job offers so you can compare salaries more easily.

It’s a baseline figure that shows your earning power without factoring in expenses or withholdings.

How to Calculate Gross Monthly Income

How you calculate gross monthly income depends on the type of work you do:

1. Salaried Employees

If you earn a fixed annual salary, simply divide it by 12.

• Example: $60,000 ÷ 12 = $5,000 gross monthly income

2. Hourly Employees

If you’re paid by the hour, multiply your hourly wage by the number of hours you work per week, then multiply by 52 (weeks in a year) and divide by 12.

• Example: $20/hour × 40 hours/week × 52 ÷ 12 = $3,467 gross monthly income

3. Freelancers or Gig Workers

Self-employed workers often have irregular income. In this case, add up your total earnings for the year (before expenses or taxes) and divide by 12 to get an average.

• Example: $72,000 ÷ 12 = $6,000 gross monthly income

Gross vs. Net Income

It’s important to distinguish between gross income and net income:

• Gross income = your total earnings before deductions.
• Net income = what you actually take home after taxes and withholdings.

For lenders and applications, gross income matters because it reflects your overall financial capacity. For personal budgeting, net income matters because it shows what you can actually spend.

Where to Find Gross Monthly Income

You don’t always have to calculate it yourself. You can usually find gross monthly income on:

• Pay stubs – listed as “gross pay” before deductions.
• Employment contracts or offer letters – typically show annual or monthly gross salary.
• Tax documents – W-2s (employees) and 1099s (contractors) reflect gross earnings.

Why Gross Monthly Income Matters

Your gross monthly income influences many financial decisions, including:

• Creditworthiness – lenders compare it to your debts to calculate your debt-to-income (DTI) ratio.
• Housing eligibility – landlords often require renters to earn a multiple of monthly rent.
• Loan approvals – banks use it to decide how much you can borrow.
• Government benefits – certain programs base eligibility on gross income thresholds.

If you need any professional assistance with gross monthly income calculation, reach out to Watter CPA today. Our team stands ready to provide expert support.

FAQs

What does gross monthly income mean?

Your total income for a month before any deductions (taxes, Social Security, health insurance, retirement, etc.). It can include salary/wages plus other recurring income sources.

Is gross monthly income before or after taxes?

Before taxes and other withholdings.

How do I calculate my gross income if I’m self-employed?

For a quick personal figure: total business revenue (before personal taxes) for the year ÷ 12.For loans, lenders usually use tax-return income after business expenses (e.g., Schedule C net profit, K-1, etc.), averaged over 12–24 months, sometimes adding back non-cash items like depreciation.

Why is gross monthly income important for loans?

Lenders compare it to your monthly debt payments to compute your debt-to-income (DTI) ratio, which helps determine approval and how much you can borrow.

Does gross income include bonuses or commissions?

Yes—if they’re earned and expected to continue. For lending, these are typically documented and averaged over time (often 12–24 months).

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