To calculate your monthly income, add up every source of money you receive in a month — wages, self-employment profit, investment returns, benefits, and support payments — after converting any non-monthly paychecks to a monthly average. Whether you report the gross figure (before deductions) or the net figure (after taxes and withholdings) depends on who’s asking: mortgage lenders want gross, most family courts want net, and bankruptcy filings use their own six-month average.
Decide Whether You Need Gross or Net First
Before you add a single number, know which version you’re being asked for. Gross monthly income is everything you earn before taxes, retirement contributions, and insurance premiums come out. Net monthly income is what actually lands in your bank account after those deductions.
The distinction changes the number significantly. Mortgage lenders qualify borrowers on gross income because they want to see full earning power before voluntary choices like a large 401(k) contribution reduce the paycheck. Family courts calculating child support generally start from net disposable income after taxes and mandatory deductions. Bankruptcy courts use a separate six-month average of all income received. Report the wrong figure and you’ll either understate your capacity and risk a denial, or overstate it and take on obligations you can’t meet.
Add Up Every Source That Counts
Federal tax law defines income broadly. Under Internal Revenue Code Section 61, gross income includes all income from whatever source unless a specific provision excludes it — wages, salaries, tips, commissions, bonuses, business profits, rental income, interest, dividends, pensions, annuities, and royalties.1Office of the Law Revision Counsel. 26 USC 61 – Gross Income Defined Income received as property or services counts too, not just cash.2eCFR. 26 CFR 1.61-1 – Gross Income
For a full monthly picture, pull together every recurring source:
- Earned income: wages, hourly pay, salary, tips, commissions, bonuses, and self-employment profits.
- Investment income: interest, dividends, capital gains distributions, and rental profits after expenses.
- Government and retirement benefits: Social Security, pension distributions, disability insurance, and veterans’ benefits.
- Court-ordered payments: alimony under a pre-2019 divorce agreement (taxable to the recipient) and child support (not taxable federally, but counted as income on many financial applications).
What You Can Leave Out
Not every dollar that enters your life is income. Gifts and inheritances are excluded from gross income under federal law, though any earnings those assets later generate — interest, rent, dividends — are taxable.3Office of the Law Revision Counsel. 26 USC 102 – Gifts and Inheritances For 2026, an individual can receive up to $19,000 from any one person as a gift without tax consequences on either side.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Other common exclusions: life insurance proceeds paid to a beneficiary, employer-provided health insurance, qualified Roth IRA distributions, workers’ compensation, child support received, and alimony under divorce agreements finalized on or after January 1, 2019. Leave these amounts out unless the form or process specifically asks for them.
Convert Your Pay Frequency to a Monthly Figure
Most people aren’t paid once a month, and this is where the math trips people up. Simply multiplying a weekly check by four undercounts your income, because some months contain five paydays. Use the annual conversion instead.
Weekly Pay
Multiply your weekly pay by 52, then divide by 12. A $1,000 weekly check: $1,000 × 52 = $52,000 ÷ 12 = $4,333.33 per month. Multiplying by four would miss about $333 every month.
Biweekly Pay (Every Two Weeks)
Multiply your check by 26, then divide by 12. A $2,000 biweekly check: $2,000 × 26 = $52,000 ÷ 12 = $4,333.33 per month. Using 26 rather than 24 captures the two extra checks biweekly earners receive each year.
Semimonthly Pay (Twice per Month on Fixed Dates)
Multiply one check by two. A $2,500 semimonthly check equals $5,000 per month. No annual conversion is needed because semimonthly schedules produce exactly 24 checks per year.
Monthly Pay
Your paycheck amount is your monthly income.
Handle Irregular or Self-Employment Income
Freelancers, gig workers, seasonal employees, and commission earners face a harder calculation because no single paycheck represents a typical month. The standard approach is income averaging: add up everything earned over the past 12 months and divide by 12. Using a full year smooths out the feast-or-famine cycles that come with project-based or seasonal work.
If you’re self-employed, your federal tax return does most of the work. Form 1040 with Schedule C shows business revenue minus expenses, producing the net profit figure that represents your actual self-employment income.5Internal Revenue Service. Instructions for Schedule C (Form 1040) Divide last year’s net profit by 12 to get your monthly baseline. Two years of returns is what most lenders want to establish an income trend, and Fannie Mae generally looks for a two-year track record on bonus, commission, overtime, and tip income.6Fannie Mae. B3-3.3-02, Bonus, Commission, Overtime, and Tip Income If your income has been rising or falling significantly, expect institutions to weight recent months more heavily or extend the average across two years.
Subtract the Right Deductions to Get Net
If the number you need is net rather than gross, subtract mandatory deductions from your gross figure. Your pay stub should itemize each one.
Payroll Taxes for Employees
Every employee pays 6.2% of wages toward Social Security and 1.45% toward Medicare, a combined 7.65%. In 2026, Social Security tax applies only to the first $184,500 in earnings; wages above that still owe Medicare but not the 6.2%.7Social Security Administration. Contribution and Benefit Base Earners above $200,000 as a single filer or $250,000 married filing jointly owe an additional 0.9% Medicare surtax on the excess.
Self-Employment Tax
Self-employed workers pay both the employee and employer shares of Social Security and Medicare, for a combined 15.3%. You can deduct the employer-equivalent half (7.65%) when calculating adjusted gross income, which lowers your income tax.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
Pre-Tax Retirement Contributions
Traditional 401(k) contributions reduce your taxable income but still count as part of your gross earnings for Social Security and Medicare tax.9Internal Revenue Service. 401(k) Plan Overview For 2026, the maximum employee contribution is $24,500, with an additional $8,000 catch-up available at age 50 or older.10Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026 This matters because gross monthly income for a mortgage application includes 401(k) deferrals, even though you never see that money hit your account. Subtract them if you need net; leave them in if you need gross.
Everything Else on the Stub
Federal and state income tax withholding, health insurance premiums, dental and vision coverage, HSA contributions, union dues, and wage garnishments all reduce take-home pay. Subtract each from gross to arrive at net.
A Worked Example
Say you earn a biweekly gross salary of $3,000, receive $400 per month in rental income after expenses, and collect $200 per month in stock dividends. Your gross monthly income works out to:
- Salary: $3,000 × 26 ÷ 12 = $6,500
- Rental income: $400
- Dividends: $200
- Gross monthly income: $7,100
For net, subtract federal and state income tax, Social Security at 6.2% of the salary portion up to the annual cap, Medicare at 1.45%, health insurance premiums, and any retirement contributions from the salary component. Rental income and dividends are subject to income tax but not payroll tax. How much lower net runs depends on your bracket, benefit elections, and savings rate.
Keep the Documents That Prove the Number
Every income figure you report needs a paper trail, and the right documents depend on how you earn.
Employees rely on recent pay stubs. Look for the “Gross Pay” line and the “Net Pay” or “Check Amount” line. For a mortgage application, Fannie Mae requires the pay stub to be dated no earlier than 30 days before application and to show year-to-date earnings.11Fannie Mae. Standards for Employment and Income Documentation Most lenders also ask for the previous two years of W-2s and federal tax returns.
Self-employed workers lean on Schedule C and, ideally, two years of returns. Bank statements showing regular deposits can back up the timing of cash flow.
Benefit recipients can request a benefit verification letter from the Social Security Administration confirming payment amounts.12Social Security Administration. How Can I Get a Benefit Verification Letter? Private pension administrators issue similar statements. For alimony or child support, keep the divorce decree or court order that sets the payment, plus bank statements showing the deposits arriving.
Keep pay stubs for salary, Schedule E or bank statements for rental income, and 1099-DIV forms for dividends organized together. If anyone questions your figure, you want every piece traceable to a specific document within minutes.