Gross income vs. Net income – basics for freelancers

As a freelancer, you should look at your work as your own business and think like a business owner.

Therefore, you should have an understanding of the basic financial categories of your income.

The main categories are gross income and net income.

Gross income is your sales. It is the income you generate from working for your clients, as well as other income you generate (for example, capital gains and dividends from personal investments, rental income if you rent a property, etc.).

Most freelancers calculate net income as gross income minus taxes and social contributions charged by the state.

However, our advice is to think like a business owner. From your gross income, you should also subtract other necessary costs that you meet as a freelancer (rental costs, costs of accountant, marketing expenses, costs of hospitality services, costs of business travel, etc.). You should calculate the income you can take home after you pay all taxes, contributions and operating expenses.

You should track these expenses and in that way, you will be able to make better business decisions.

 

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