So, you want to apply for a credit card. If you don’t have the necessary financial know-how, you may find the whole process puzzling, confusing, and overall very annoying.
Let’s start with the basics. More precisely, let’s begin by answering a simple yet tricky question.
Among the required personal information in your application, you will probably find your annual income.
What is total annual income?
Let’s check that out. After clearing up your doubts, make sure to keep on reading to find out the answer to six other vital questions on the topic.
What Does Total Annual Income Mean?
Annual income simply means the total amount of money you receive in a year, before taxes or any other deductions.
This sum includes your regular salary, as well as any other type of income, such as a pension, self-employment income, child support, or interests from investments.
Keep reading for a comprehensive list of all types of income you want to account for when calculating your gross annual income. You will also find a handy calculator below to help you do the math.
1. How to Calculate Annual Income?
Overall, calculating annual income is not as complicated as some people think; it’s just a matter of multiplication and addition—nothing more, nothing less.
Let’s see what you need to do.
First of all, you have to understand what counts as income. It’s not simply your salary or wages—there’s much more to account for. Let’s see.
Start by including your standard wages, salary, and anything else from an employer. If you’re self-employed, add your gross earnings. Remember to count everything before deductions, so do not take out any business expenses. It’s important not to confuse total annual income with your annual net income. They’re two different things.
Child support, alimony, pensions, social security, disability, and welfare checks all count as types of income.
If you’ve made any money from investments, include it in your annual income. The same applies to capital gains from selling any asset throughout the year. Finally, you should add any rental income coming from a property you’ve owned for more than six months.
We’re not done calculating the annual income, meaning we have to establish our fiscal year.
A fiscal year, or budget year, is any continuous 12-month period we take into account when preparing any financial report or statement. In our case, we could consider the period that spans from January 1 to December 31, also called a calendar year.
If you run a business, you may want to go with your government’s fiscal year—in the case of the United States, that would be from October 1 to September 30. You may also choose any period you prefer, perhaps a period of low business activity.
Alright! We have established our income types and fiscal year. What now?
It’s time to calculate your annual income! If you need to deal with wages or salaries, we highly suggest using an annual income calculator. In our case, we chose Omnicalculator.
If you’d like to do it yourself, for whatever reason, you easily can. If you’re using hourly rates, you want to multiply them by the number of hours you work in a year, which on average is 2,000. If you’re using daily earnings, you should multiply by 250. Weekly payments follow the same principle and should be multiplied by 50. If you’re going monthly, you just need to multiply by 12, which is called gross monthly income.
Remember to add any additional revenue to your results, and you’re set.
2. What Is Annual Household Income?
Annual household income follows the same basic guidelines as annual income, only aimed at every occupant of any housing unit over 15 years of age.
Naturally, in most cases, it’s going to be a more substantial sum than any personal annual income and a more trustworthy report of how financially stable a family is. It helps determine how rocky things have to get economically before seriously impacting a household.
3. Does Total Annual Income Include Taxes?
Total annual income is, by definition, your gross earnings before any taxes. Unlike taxable income, it should not include any deductions whatsoever.
It’s simply the sum of your employment wages or salary plus any other additional income you may receive, such as alimony, child support, interest rates from investments, capital gains, etc.
4. What Is Estimated Annual Income?
The estimated annual income is entirely different from anything we’ve previously mentioned.
Abbreviated as EAI, this type of income concerns investments. It estimates how much you will earn from capital gains, interest and dividends from your speculations. Analysts can extrapolate it from past data and any statements provided by the securities’ issuers.
Naturally, this is just an estimate, and your actual earnings may be lower or higher, depending on a myriad of factors that are not easy to account for.
5. What Is the Top 1% Income in the US?
Your business has done exceptionally well this year, and now you want to know if you’re finally part of the top 1% of earners.
It’s surprisingly easy to know if you made it or not.
You can measure either by state or at the national level. We’ll mention the national average, and the lowest and highest state thresholds.
The top 1% income threshold average across the United States is the impressive sum of $597,815, a six-figure income. The highest threshold is in Connecticut, where the top 1% income starts at $896,490. The lowest is in West Virginia, where you have to earn a “meager” $350,212 to become a one-percenter.
For comparison purposes, the average annual salary in the US in 2022 is $53,490.
6. What Is Total Annual Income for Credit Card Applications?
We’ve finally come full circle.
When applying for a credit card, the issuer will most likely ask about your total annual income, and that’s precisely what you’ve learned to calculate by reading this article.
Just for those who skipped right to this question, here’s what you need to know:
Total annual income is how much you earn through all of your revenue streams.