Total annual income refers to the total amount of money that an individual earns within a calendar year.
This is an important consideration when it comes to opening bank accounts and applying for various credit and financing products.
In this article, we’re going to share everything you need to know about total annual income, including how it compares to other measurements of income and how to calculate it.
This article is part of our series on banking basics, ranging from opening bank accounts around the world to understanding how various aspects of the banking system operate.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Total Annual Income
- Why Do Banks & Credit Cards Card About Annual Income?
- Gross Annual Income vs Net Income
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Total Annual Income
Total annual income refers to the total amount of money that an individual generates from all income sources within a calendar year. Also known as gross income, it reflects an individual’s personal income prior to income tax and other deductions.
Importantly, if an individual is unemployed or a dependent, total household income may be used in the income calculation. That said, this usually depends on the income definition used by the bank or credit card issuer. So, it’s best to confirm before submitting your completed application.
Likewise, certain banks and financing institutions use “net income” instead of total or gross income. This refers to the remaining balance on your personal income statement after all taxes and certain expenses have been paid.
Certain banks may provide you with an income calculator or income estimator directly within the online application that you are completing. In these cases, the bank is typically trying to assess your average income or the income bracket that you fall into.
Of course, any time you are completing a credit or financing application, exact income and deductions will be required in order to assess your application.
Why Do Banks & Credit Cards Card About Annual Income?
Banks and credit card issuers use annual income to determine if an applicant is qualified for credit and financing products. More specifically, annual income is used to determine the level of debt that an individual can support.
This determination looks at debt servicing and income-to-debt ratios based on existing debt, desired debt, and total income. So, anytime someone applies for credit or financing products, they need to confirm their annual income during the application process.
That said, annual income is only one of the variables that banks and financial institutions look at during credit applications. If you would like to learn more about the other variables, please use the other free resources available on our site.
Gross Annual Income vs Net Income
The main difference between gross annual income and net income is that gross annual income is the total amount of money earned prior to deductions while net income is the total amount of money earned after deductions.
That said, there are several nuances that should be considered when comparing these two income calculations, which we share below.
Gross Annual Income
Gross annual income is the total amount of money that an individual earns within a calendar year. This figure includes all of the income generated from all sources of income, not just an individual’s primary income.
If an individual is unemployed or is married, gross annual income may also refer to gross household income which is the combined total of all sources of income from adults in the same household.
Net Income
Net income is the total amount of money that an individual earns within a calendar year after taxes and certain expenses. This figure includes all of the income generated from all sources of income, not just an individual’s primary income.
Importantly, different financial institutions may take different expenses into consideration when calculating net income. So, it’s important to confirm the specific inputs that a bank or credit card issuer wants you to deduct prior to providing net income.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into what total annual income is. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is the Gross Annual Income for $12 an Hour?
The gross annual income for an individual earning $12 an hour who works full time is USD 24,960. This calculation includes the earnings of $12 an hour multiplied by 40 hours per week and then multiplied by 52 weeks per year. This is the total gross annual income prior to any deductions or taxes.
What Is the Annual Income for $17 an Hour?
The gross annual income for an individual earning $17 an hour who works full time is USD 35,360. This calculation includes the earnings of $17 an hour multiplied by 40 hours per week and then multiplied by 52 weeks per year.
How Do I Calculate My Income?
To calculate your gross income you need to know the total amount of money you earn during a specific period, such as hourly. You then need to confirm the total amount of money you earn per week by multiplying the hourly wage by the hours you work per week, such as 40. Finally, you then multiply the amount of money you earn per week by the total weeks you work per year, such as 52. The resulting number is the total gross annual income.
How Do I Calculate My Hourly Wage?
To calculate your hourly wage, you first need to know your gross annual income. You then need to confirm the amount of money you make per week by dividing your annual income by the number of weeks you work per year, such as 52. Then, you can confirm the total amount of money you earn per hour by dividing by the number of hours you work per week, such as 40. The resulting number is your gross hourly wage.
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