A taxpayer's gross income is basically his or
her income before any tax deductions are taken. The gross income might
include income from W-2's, self employment, capital gains, or anything of value
received by a taxpayer that cannot be excluded as income. From TITLE 26,
Subtitle A, CHAPTER 1, Subchapter B, PART I, Sec. 61, Gross Income includes:
(1) Compensation for services, including
fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.
Gross income can be viewed as a starting point
as a way of determining a taxpayer's tax liability for a given tax year.
It is also important for determining the
AMT
(Alternative Minimum Tax), which may affect some airline crewmember's with
higher incomes and many
itemized
deductions.
Assuming a taxpayer is not affected by the AMT,
Gross Income leads to
adjusted gross
income, adjusted gross income Leads to
taxable income, and
taxable income leads to a taxpayer's
tax liablility as
follows:
Gross Income -
Above-the-Line Deductions = Adjustable Gross Income
Adjustable Gross Income -
Below-the-Line Deductions = Taxable Income
Taxable income is used to determine tax
liability by looking at the
tax rate tables for a
given tax bracket.