Gross income is commonly defined as the amount of a company's or a person's income before all deductions or any taxpayer’s income, except that which is specifically excluded by the Internal Revenue Code, before taking deductions or taxes into account. For a business, this amount is pre-tax net sales less cost of sales. Section 61 of the Internal Revenue Code (Code) defines "gross income" as "all income from whatever source derived." Section 61(a) of the Code lists fifteen examples of items included in gross income; however, the list is not exhaustive. Therefore, unless the Code specifies that something is excluded from gross income, the assumption is that it is included. Exceptions to what is included in gross income can be found under §§ 101-140 of the Code. Each of these sections excludes a particular type of inflow if it meets the criteria stated. For the purpose of a company's description of an employee's income, the term annual earnings may be used because a person may have other sources of taxable income in a year than what is earned from the employer. For instance, cashing out a Canadian Registered Retirement Savings Plan results in additional income that must be claimed as part of total world income.

Further description of the items included in gross income per the IRS, are in Part II of Subchapter B of Chapter 1 of the Internal Revenue Code. Items specifically excluded from gross income are listed in Part III of the same subchapter.

In Commissioner v. Glenshaw Glass Co., the U.S. Supreme Court provided a standard for determining whether something is includable in gross income. The court held that all amounts received by taxpayers which are “undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion” are includable in gross income.