There are many important situations where you’ll need to provide your yearly income. For example, when applying for a loan, you’ll need to know your yearly salary to complete the documents.
Of course, if you’re not a math whiz, it can be difficult to calculate your salary. There is also a difference between your gross annual income and your net annual income. Don’t worry — we can tell you everything you need to know.
To find out how to calculate your yearly income, check out the simple guide below.
How to Calculate Your Yearly Income
Calculating your yearly income requires you to know some key details about your pay structure. First, find out what your wage amount is. Second, determine whether you’re paid hourly, daily, weekly, or monthly.
After you collect this information, you can use this guide to figure out how to calculate your salary.
Gross Income vs. Net Income
Depending on what you need to calculate your yearly income for, you may need to know your gross income amount or net income amount. You’ll need to distinguish between the two.
Gross income is what you make yearly before taxes come out of your check. Of course, this isn’t the actual amount of money that you take home. However, many institutions still use this as the basis for how much money you make per year.
Net income is what you take home. It is your salary after you subtract taxes and other expenses. Institutions may occasionally ask for this, but it is more complicated to calculate.
Gross Income for an Hourly Salary
If you’re paid hourly, the calculation is relatively simple. Where it gets difficult is if your hours per week or month vary.
If your hours vary, you need to check your pay stubs to add up how many hours you work in a year. If you work the standard 40 hours a week, you can simply calculate 40 hours x 52 weeks = 2080 hours a year.
Once you have the total hours, multiply that amount by your hourly salary. Don’t forget that paid vacations also count as work. If your weekly hours vary, most loan companies and landlords will want an average of your last three paychecks to determine your income.
Gross Income for a Monthly Salary
Calculating annual income for a monthly salary is very straightforward. There are 12 months in a year, so you only need to multiply your monthly salary amount by 12.
Make sure to add any bonuses or commissions you receive. This counts as income earned. You should also include holiday bonuses in your yearly income amount.
More Financial Advice
Now that you know how to calculate your yearly income, you can use this number to apply for loans, financial aid, and fill out housing applications. While gross income is relatively simple to calculate, net income is not. Should someone ask for your net income, you need to determine your total amount of taxes and other expenses paid for the year.
