Gross monthly income is the amount of money you earn monthly before anything is taken out of your paycheck.

This isn’t the same as your take-home pay, which is what you get after taxes and other payments come out of your earnings. For example, Social Security and Medicare taxes, the cost of your health insurance, and retirement contributions might be deducted directly from your salary. Employers usually also withhold income taxes.

Many employers offer jobs with an annual salary agreed in your contract. The biggest difference between a gross monthly income and a yearly income is the time period involved.

However, what you earn in a month also includes irregular or unexpected income that may not appear in an annual salary number. You may have side jobs or make money from bonuses, investments, or other methods outside of a traditional job. All of that extra money should be included in your gross monthly income.

Let’s explore how to calculate gross monthly income and when it comes in handy.

How to calculate gross monthly income

Here are a few simple steps to calculate your gross monthly income.

1. Calculate your monthly salary

If you have an annual salary, divide that by 12 to get a monthly number.

Otherwise, your employee pay stubs will usually list the gross pay, which is your income before anything is deducted. Take note of the relevant pay period and add up the gross pay for the entire month.

If you work for yourself or have other regular contracts, include that income for the month.

2. Add up your additional income

Figure out how much you make in a month (before taxes) from any other sources of income, like interest, real estate rentals, alimony, and side gigs. Add that up too.

3. Combine them for your total gross monthly income

Add everything together, and you’ve got your gross monthly income.

Gross monthly income formula

You can calculate your gross monthly income by looking at how much you receive over a specific period of time. If you have more than one job, calculate the income across all your jobs. Here are some examples of how to determine your income for different kinds of jobs.

For hourly pay

Gross monthly income = (Hourly pay) x (Hours worked in a month)

To calculate the hours worked in a month, you can add up the daily total from your timesheet. If you worked the same number of hours each day:

Total monthly hours worked = (Hours worked per day) x (Number of days worked in the month)

Some months will have more workdays than others, so it’s important to calculate your pay based on the actual days worked.

Example: Let’s say your hourly pay is $20.

If you worked 100 hours in the month, then your gross monthly pay is $20 x 100 = $2,000.

If you worked 8 hours a day for 20 days in the month, then your gross monthly pay is $20 x 8 x 20 = $3,200

For annual salary

Gross monthly income = (Annual salary) ÷ 12

Use the yearly salary that you receive before anything is deducted. Divide that by twelve, and you’ll have your gross monthly income.

Example: Your annual salary is $60,000.

Gross monthly pay = $60,000 ÷ 12 = $5,000

For biweekly pay

Biweekly pay is usually issued on the same day every other week, a total of 26 times in a year.

Gross monthly income = (Biweekly payment made once every two weeks) x 26 ÷ 12

Or, even faster, (Biweekly payment) x 2.16667

Example: Let’s say your biweekly pay is $2,000.

Gross monthly pay = $2,000 x 2.16667 = $4,333.33

If for some reason your biweekly payments change from one paycheck to the next, you can figure out your daily earnings by dividing each biweekly payment by the number of days in that period. Then, add up your daily earnings for the whole month.

For bimonthly pay

Bimonthly pay is also known as semi-monthly, where employers pay twice a month. The payment days may be fixed, like the 1st of the month and the 16th of the month. 

Gross monthly income = (Bimonthly payment) x 2

Example: Let’s say your biweekly pay is $2,500.

Gross monthly pay = $2,500 x 2 = $5,000

If you get paid twice a month and the amounts are different, just add those two payments together to figure out your monthly income.

What is gross monthly income used for?

Gross monthly income matters for many calculations ranging from tax payments to applications for loans and government benefits.

When to use gross monthly income

Figuring out your gross monthly income may be important in situations you might not have considered. Your gross income is used in the following scenarios:

  • Loan applications. Lenders look at your debt-to-income ratio to decide how likely it is that you can actually pay back a loan you’re applying for. Most lenders want your debt payments to be 35% or less of your monthly gross income. A high ratio makes you a riskier borrower, while a lower ratio can help you gain access to loans and better interest rates.
  • Credit limits. Just like when you’re trying to qualify for a loan, lenders may use your gross income to adjust your credit limit. A credit limit is the maximum amount you can borrow from the bank or lender.
  • Government benefits. Eligibility for government-subsidized benefits like Social Security and Medicaid often depend on your gross income. The government compares your gross earnings to specific levels when determining the amounts you qualify for.
  • Taxes. The amount of tax you pay changes according to your eligibility for tax deductions and credits. Tax formulas use adjusted gross income to decide how much you owe.
  • Rental applications. Landlords often use gross income to decide whether you can afford rent.

When to use after-tax monthly income

Your after-tax monthly income is the amount you’ll use to craft a budget — this is the cash you can spend or save. By calculating your after-tax monthly income, you’ll know what’s available for needs, wants, and savings, including investments or retirement contributions.

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