To calculate annual income if you have multiple jobs, calculate annual income for each and add them up to get your total annual income — just be sure you’re adding gross + gross or net + net. Calculating net income is a little trickier because deductions like Insurance Accounting taxes might not show up until you file your taxes. One way to calculate annual income if self-employed is to calculate your business income for the year. If you use an accounting platform, it’s often easy to run reports for a self-employment annual income calculation. “From there, you can budget other expenses, both short-term and long-term, because you’ll know the amount that you’ll get each paycheck.”
What Is Annual Income? Here’s How to Calculate It.
This is the amount of income you receive before taxes or deductions; if your only source of income is a yearly salary, this number reflects your pre-tax income. To calculate take-home pay, take your gross pay for that period total annual income and subtract the amounts your employer withheld for income taxes, payroll taxes, benefits, and deductions. That said, the easiest way to determine take-home pay after taxes is generally to just look at your last pay stub, Phillips says.
What You’ll Gain from This Guide
In this guide, the term “annual income” will be used as shorthand for net annual income. In other words, this phrase represents the amount of money you keep from your pay per year. In this article, we’ll explain what an annual income is and how to calculate it.
How Deductions Affect Your Annual Income
Some businesses use annual compensation as a way to measure your earnings. This refers to your yearly salary plus any other benefits you receive from your employer in financial perks, like bonuses, commissions, paid time off (PTO) and other fringe benefits. You may also have other types of income, such as gains on proceeds from stock sales or interest from financial accounts. These benefits reduce your taxable income, leading to lower tax liability. Common pre-tax benefits include health insurance premiums, flexible spending accounts (FSAs), and health savings accounts (HSAs). Enroll in these programs during your employer’s open enrollment period.
Beyond the numbers: Life phases and job sectors
- Be sure to include any additional income, such as side jobs, rental income, or other sources, in your final total.
- However, if it’s irregular, it can be hard to estimate over the course of a year, so you might prefer to leave it out and treat that extra income as a bonus.
- Remember to adjust the equation if you work fewer than 12 months or 52 weeks per year (aside from paid time off).
- It’s helpful to know for personal financial planning too, says Eric Phillips, senior director of financial partnerships and strategic insights at Human Interest, a 401(k) provider.
But if you do not receive paid vacation days, you will need to adjust the calculations to account for any days you took off without pay. This is why we use the average hours worked per week figure, which can be slightly lower than the typical hours worked per week alternative. Homebase makes managing hourly work easier for over 100,000 local businesses. With an employee scheduling app, employee schedule maker, and work schedule What is bookkeeping app, Homebase is built for staff scheduling, shift swapping, predictive scheduling, auto scheduling, rotating schedules. Check out our shift schedule template, employee schedule template, schedule planner, and weekly schedule template.
While knowing your monthly income is often enough to create a budget, income and expenses can vary month to month, so sometimes budgeting needs to be looked at over a longer period. How you calculate annual gross income is slightly different depending on whether you earn an annual salary or an hourly wage. If your hourly wage is $15, you would need to determine the average number of hours you work per week and then multiply that by 52 weeks per year. You will also have to account for tax withholdings and any other deductions you might have. Use our annual income calculator to calculate your yearly income given your hourly wage.
- On a broad scale, annual income is an essential metric for determining your business’s finances and overall financial health.
- But your income may impact your ability to borrow money due to your debt-to-income (DTI) ratio.
- Online income calculators are user-friendly tools that can quickly estimate your gross and net annual income, saving you from tedious manual calculations.
- Or, you might estimate how much you’ll earn from these based on your performance so far this year.
- If you get paid biweekly, you can figure out your annual gross income by multiplying your gross biweekly pay by 26, the number of times you’re paid per year.
His expertise and dedication ensure we deliver top-notch solutions to our clients around the world. Check out Entrepreneur’s other articles for more information about income and other financial topics. Annual income further allows you to decide whether to buy something as a person or a business. Your pay stub should provide you with all of this information—like which deductions you have taken out of your paychecks and in what amounts.