What Does Annual Net Income Mean?

Taxes reduce annual net income.
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The amount of money you have at your disposal to spend as you please differs from the amount you actually take in because a portion of your income or revenue goes toward work-related expenses. Net income is the amount that remains after you pay costs necessary to earn a living.

Individual Net Income

For individuals, annual net income equals your gross income minus taxes, retirement deductions, health care deductions and other payroll deductions. In other words, net annual income is the pay you actually take home after covering costs related to earning the income.

Business Net Income

For businesses, net annual income, or net profit, equals the revenue a company generates in a year minus its costs such as purchases, production expenses, labor, taxes, interest expenses, overhead, utilities and other expenses. If a company has positive net income, it has recorded a profit. If it has negative net income, it is operating at a loss.

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