Annual income is the amount of money you earn on a yearly basis. This amount may be net of the deductions or gross of the same. Most people will have other sources of income apart from the salary. The gross annual income is preferred to the net income since deductions can vary each month making it difficult to determine clearly what you earn.
It is easy to calculate what you earn annually if you know what you earn every month. Other incomes are added to the income from salary when calculating the taxable amount. You might be receiving benefits from the employer on top of the basic salary. Such benefits are also included in the computation of the annual income.
What is Annual Income Mean?
It is the average income you receive on a yearly basis. For most income earners, they will have a standard flow of income annually. However, the incomes in each year are bound to vary. You can get the average annual income by dividing with the respective number of years the incomes were realized. Annual incomes for different years may vary due to a salary raise, different job with better pay, an increase of benefits or investments. It is vital to know your annual income mean for the purpose of comparison and record keeping.
How To Calculate The Annual Income?
For salaried employees, with no other source of income, it can be easy to determine their annual income as you only need to take the income of a single month and multiply by 12 months. However, for those who are paid on an hourly or biweekly basis, it will require more computations to arrive at the annual income. If you have additional investments or income flow, you will need to include them on top of your annual salary. You might be self-employed, running a small business, or just employed earning a salary. Here are the steps to help compute your annual income:
1. Identifying Income Sources
If you have a business, your sources of income will be your customers. You can identify them and include them in calculating what you earn per month. If you receive a salary per month or paid per hour, you can flag that as a source of income before computing the gross income per month.
From each source of income, you can locate what you get and compute the aggregate amount. This will earn you a monthly income you get from all the sources you have identified above. You don’t have to compute per month. You can do it on a weekly basis or bi-weekly depending on how you receive the incomes.
2. Multiply The Total Earnings Per Month By 12
When you have the aggregate income for a month, you can multiply by 12 to get the annual income. If this amount is not consistent, you can calculate each month what you get and add for all the months to arrive at the annual amount. This is done for tax purposes and to present to the lenders in case you want to acquire financing.