VO Tip #3: How Much $$ Did you Really Make? Gross Income vs. Net Income
By Regina P. Brown, M.B.A., Broker, Instructor
(MBA Broker Consultants)
During the presidential election race, "Joe the Plumber" asked Presidential candidate Obama, "I'm thinking about buying a business that makes over $250,000 per year, would I be taxed more?" The BIG problem with this trick question: Is the $250,000 GROSS profit or NET profit? That's a big difference! And unfortunately most people don't know the difference -- not even many self-employed folks such as real estate agents. It's flattering to go to a party and throw around that you "earned over $200,000 last year" -- but you really know that once you deduct your expenses, you only earned (netted) $50,000. So it doesn't sound as great as the gross income you bragged about at the party. To simplify it in a nutshell: Your GROSS income is the TOTAL amount of money you earned (and collected). ...