Your personal net income is equal to your: Gross income.
Gross income minus your expenses.
Gross income minus taxes and other deductions.
Gross income plus taxes and other deductions.
The correct answer and explanation is:
The correct answer is: Gross income minus taxes and other deductions.
Personal net income refers to the amount of money you take home after all required deductions have been subtracted from your gross income. Gross income represents your total earnings before any deductions are made, including taxes, health insurance premiums, retirement contributions, and other withholding obligations.
Net income is often considered the “real” income because it reflects the amount of money available to spend, save, or invest after meeting necessary financial obligations. The deductions that reduce gross income to net income typically include federal, state, and local taxes, Social Security contributions, and any other automatic deductions such as health insurance premiums, union dues, or retirement plan contributions.
For example, if your gross income is $4,000 per month and you have $1,000 in deductions (for taxes, insurance, and other benefits), your net income would be $3,000. This is the amount you would use to cover personal expenses like rent, utilities, food, and other lifestyle costs.
Understanding the difference between gross income and net income is crucial for budgeting and financial planning. While gross income gives a sense of overall earnings, net income offers a clearer picture of your disposable income. Many individuals focus on their net income when evaluating their financial situation because it directly impacts their daily lives and financial decisions.
In summary, personal net income is the amount left after all taxes and deductions have been accounted for from your gross income. This is the actual income you receive, which reflects the resources available for spending and saving.