when you complete your income tax return you subtract a standard deduction or a list of itemized deductions from your agi and the difference yields your taxable income the amount upon which the irs levies an income tax 
examples of gross earningsto understand individual gross earnings consider mr z who earned a total of 50 000 for the recently completed fiscal year he also paid 10 000 in income tax retirement contributions and social security payments in this case his gross earnings are 50 000 and his net earnings are 40 000 but how does it work for businesses here s a simple example let s say company x has sales of 2 million cost of goods sold of 500 000 and expenses related to the sale of 300 000 the company s gross income is 1 5 million after the other deductions it is left with 1 2 million in net income 