Gross income facts for kids
Gross income is all the money or valuable things you get from any source. Think of it as your total earnings before anything is taken out, like taxes or other deductions. It's a key idea in how taxes work in the United States. Basically, if you earn it, it's usually part of your gross income.
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What is Gross Income?
Understanding Your Total Earnings
Gross income means the total amount of money you earn or receive. This could be from a job, selling something, or even winning a prize. It's the full amount before any expenses or taxes are subtracted. For example, if you earn $100 from a lemonade stand, that $100 is your gross income.
Why Gross Income Matters for Taxes
In the United States, your gross income helps decide how much tax you might owe. The government looks at your total earnings to figure out your tax bill. However, not everything you receive is counted as gross income for tax purposes. Some things are specifically left out.
What's Not Included in Gross Income?
Some types of money you receive are not counted as gross income when calculating taxes. These are called "exclusions." Here are some common examples:
- Life Insurance Payments: Money paid to a family member after someone dies, from a life insurance policy, is usually not counted.
- Gifts and Inheritances: If someone gives you a gift, or you receive money or property after someone passes away (an inheritance), it's generally not part of your gross income.
- Interest from State and Local Bonds: Interest you earn from certain bonds issued by state or local governments is often tax-free.
- Money for Injuries or Sickness: Payments you get because of an injury or illness are usually not counted as gross income.
- Accident and Health Insurance Payments: Money received from accident or health insurance plans is typically not included.
- Military Combat Pay: Special pay for military members serving in combat zones is often excluded from gross income.
- Scholarships: Money you get for a scholarship to pay for tuition or books is usually not counted as gross income.
These exclusions help people keep more of certain types of money they receive.
