Poll

What does the word "income", absent qualifiers, mean to you?

Gross income/Income before any taxes deducted
81 (82.7%)
Net income/Income after all taxes deducted
10 (10.2%)
Take-home pay/Income after all taxes and 401k etc. deducted
5 (5.1%)
Some other number
2 (2%)

Total Members Voted: 97

Voting closed: December 03, 2016, 12:21:33 AM

Author Topic: Income Before and After Taxes  (Read 4810 times)

yakamashii

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Income Before and After Taxes
« on: November 23, 2016, 12:21:33 AM »
I want to respond to the following poll on this forum:

http://forum.mrmoneymustache.com/welcome-to-the-forum/household-income-percentile/


but there is no explanation of what "income" means: gross, net or something else? I want to see if there is a general/accepted idea of what "income" is, and to adjust my thinking if my idea of "income" is divergent from what a convincing majority thinks.

My thinking, as a freelance translator in Japan:

A. Total revenue = The total amount of money clients pay for my services, including reimbursement for travel, accommodation and other expenses.
B. Business expenses = Any money I spend on the business, including expenses that will be reimbursed by clients, and tax deductible portions of communications, rent and the like.
C. Gross income = A-B.
D. Taxes = National and local income taxes due on gross income, and social security and social health insurance premiums. I count the latter as taxes because they are calculated based on C; I can only adjust those premiums by adjusting C.
E. Net income/Take-home pay = C-D.

I consider "income" with no other qualifiers to mean E. I use E to calculate my savings rate and guide my decisions on spending.

Two places I expect to differ from most: Counting health insurance as a tax, and lack of tax-sheltered retirement investment.

What does "income" mean to you? How do you count social security/health insurance premiums, and contributions to tax-sheltered retirement accounts?

marty998

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Re: Income Before and After Taxes
« Reply #1 on: November 23, 2016, 01:31:25 AM »
Income is whatever gross income I report on my tax return, before deductions. Plus super contributions that I do not have to report. This includes gross dividends and rent, before dividend, interest and rental property deductions.

If I had a business, I would only include the net profit of the business, assuming unincorporated.

If incorporated, I would count the dividends from the company.


arebelspy

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Re: Income Before and After Taxes
« Reply #2 on: November 23, 2016, 04:05:20 AM »
If someone said "I make $150,000" with no other details, I would assume gross, before taxes (the first option).

If they said "I take home..." obviously that would be different.  But if they just said "I make" or "My income is" that's what I'd think.
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2Birds1Stone

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Re: Income Before and After Taxes
« Reply #3 on: November 23, 2016, 04:21:12 AM »
Hey there OP, I actually should have specified in the poll thread I created.

The calculator I linked uses gross household earnings to determine income percentile.

I'm sure it's not 100% accurate, as they rarely are, but I was curious to see how the MMM community faired vs. the rest of the population.

use2betrix

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Re: Income Before and After Taxes
« Reply #4 on: November 23, 2016, 06:51:34 AM »
If someone said "I make $150,000" with no other details, I would assume gross, before taxes (the first option).

If they said "I take home..." obviously that would be different.  But if they just said "I make" or "My income is" that's what I'd think.

This exactly is the general understanded meaning of the term.

Crusader

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Re: Income Before and After Taxes
« Reply #5 on: November 23, 2016, 07:22:40 AM »
I generally say income to mean gross unless net income is specified or I specify it when I say it.

Paradoxically

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Re: Income Before and After Taxes
« Reply #6 on: November 23, 2016, 09:39:42 AM »
Gross income.

SeaEhm

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Re: Income Before and After Taxes
« Reply #7 on: November 23, 2016, 10:02:05 AM »
If on the internet:
 
I take income to mean - if I add my current income, my raise that I might get before the end of the year, sell the things I have in my garage, sell blood, sell the litter my dog may or not have, plus the income from the business idea in my mind, I will make...

If in person:

I take income to mean:  I will take what I currently make gross and round it up to the nearest $10k.


obstinate

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Re: Income Before and After Taxes
« Reply #8 on: November 23, 2016, 11:59:50 AM »
A generic term doesn't mean a specific thing. Ask for clarification.

GetItRight

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Re: Income Before and After Taxes
« Reply #9 on: November 23, 2016, 02:54:34 PM »
Gross income. I track taxes in Mint so I know how much is stolen from me. Taxes is my biggest spending category aside from student loans which is only slightly higher, and that's not including every last tax such as sales tax and various other visible taxes. It disgusts me to think about how great life would be if the government didn't steal so much from me.

yakamashii

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Re: Income Before and After Taxes
« Reply #10 on: November 23, 2016, 06:58:29 PM »
Thanks for the responses.

A generic term doesn't mean a specific thing. Ask for clarification.

I understand that, and of course in a one-on-one conversation, I'd ask for clarification. However, none of the first dozen responders on the thread needed to ask, and the website hosting the calculator didn't bother to clarify. Clearly, the generic term "income" in this kind of context means gross income to most people. That's important for me to know, as someone who doesn't think that way, and moreover as a translator.

 

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