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Terms and Definitions

What is a gross-up?

Updated: May 20, 2024

Gross-up definition and meaning

A gross-up is money added to a payment to cover income taxes the recipient will owe. It is most often seen in executive compensation plans.

 

More about what a gross-up is used for

Companies sometimes pay employees and don’t realize that the check needs to be grossed up to cover taxes when running through payroll. A gross-up can also change the dollar amount that an individual receives. For example, if an employee expects a payment of $10,000 after taxes — the payment can be grossed up once tax is withheld — the employee will net $10,000.

 

Most of the time, a gross-up is can be used for one-time payments, such as reimbursements for employee relocation expenses or bonuses.

Using gross-up in a sentence

“I will need to run a gross-up to make sure that the company owner will take home $1,000 for their holiday bonus after taxes are taken out.”

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