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Gross Income

What is gross income and how is it calculated?

A taxpayer's gross income is essentially 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.

Why is gross income important for flight crew member tax returns?

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.

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