About the Net Income Calculator
This net income calculator walks a multi-step income statement from the top line to the bottom line. Enter revenue, cost of goods sold, operating expenses, depreciation, other income, interest and your tax rate, and it shows gross profit, EBITDA, operating income (EBIT), pre-tax income, income tax and net income — plus the gross, operating and net margins at each level.
It is useful for small-business owners checking what they actually keep from sales, students learning how an income statement is built, and anyone preparing a quick profit-and-loss for a lender or partner. Seeing each subtotal makes it obvious whether a weak bottom line comes from pricing and direct costs, overheads, or financing.
Tax is applied as a flat effective rate to pre-tax income and only when pre-tax income is positive (a loss produces zero tax rather than a refund). For a business that is a pass-through entity, set the tax rate to 0 to see profit before owner-level tax.
With the default inputs, the net income is $142,200.00. Change any value above to recalculate instantly.
How to use the net income calculator
- 1Enter net revenue for the period.
- 2Enter cost of goods sold and operating expenses (excluding depreciation).
- 3Add depreciation, any other income or expense and interest expense.
- 4Enter your effective income tax rate (0 for a pass-through business).
- 5Read net income and the margins, and use the statement table to see each step.
Formula and method
A multi-step income statement subtracts costs in layers. Gross profit shows what is left after the direct cost of the goods or services sold. Subtracting operating expenses gives EBITDA, and subtracting depreciation and amortisation gives operating income (EBIT) — the profit from the core business.
Non-operating items come next: other income or expense is added and interest expense is subtracted to reach pre-tax income (EBT). Income tax is EBT multiplied by your effective tax rate when EBT is positive; net income is what remains for owners. Each margin divides the subtotal by revenue, which makes businesses of different sizes comparable.
- COGS
- Cost of goods sold (direct costs)
- D&A
- Depreciation and amortisation
- EBIT
- Earnings before interest and taxes (operating income)
- EBT
- Earnings before tax (pre-tax income)
Worked examples
Profitable small company
Revenue of $1M less $400,000 COGS leaves $600,000 gross profit. Subtracting $350,000 of overheads and $50,000 depreciation gives $200,000 EBIT. Adding $10,000 other income and subtracting $30,000 interest leaves $180,000 pre-tax; 21% tax of $37,800 leaves $142,200 net income.
Business running at a loss
Gross profit of $200,000 does not cover $240,000 of overheads and depreciation, so EBIT is −$40,000. After $10,000 interest, the loss is $50,000; no tax is due, so net income is −$50,000, a −10% margin.
Manufacturer with 25% tax
A 40% gross margin gives $1M gross profit; after $700,000 of overheads and depreciation, EBIT is $300,000. Other income and interest bring EBT to $250,000, and 25% tax leaves $187,500 — a 7.5% net margin.
Frequently asked questions
What is the formula for net income?+
Net income = revenue − cost of goods sold − operating expenses − depreciation − interest − taxes + other income. Equivalently, it is total revenues and gains minus total expenses and losses for the period.
What is the difference between gross profit and net income?+
Gross profit only subtracts the direct cost of goods sold from revenue. Net income also subtracts operating expenses, depreciation, interest and taxes, so it is the true bottom-line profit left for owners.
Is net income the same as cash flow?+
No. Net income uses accrual accounting and includes non-cash expenses like depreciation, while cash flow tracks actual cash in and out, including capital purchases, loan repayments and changes in receivables and inventory.
What tax rate should I use?+
Use your effective income tax rate — total income tax divided by pre-tax income. US C corporations pay a 21% federal rate plus any state tax; pass-through businesses such as sole proprietorships and S corporations pay tax at the owner level, so use 0 to see business profit.
Can net income be negative?+
Yes. When total expenses exceed revenue the result is a net loss. A loss reduces retained earnings and, for tax purposes, may create a net operating loss that can offset future profits.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.