Net Income Calculator

Revenue

Cost of Goods Sold

Operating Expenses

Interest Expense

Tax Rate

$87,100

Net Income

17.4%

Net Margin

$300,000

Gross Profit

$120,000

Operating Income (EBIT)

$110,000

Pretax Income

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How to Use This Net Income Calculator

Revenue — total sales for the period.
COGS — direct cost of goods or services sold.
Operating Expenses — overhead: salaries, rent, marketing, software, etc.
Interest Expense — interest paid on loans or credit.
Tax Rate — your effective income tax rate (US federal corporate is 21%; adjust for your situation).

What Is Net Income?

Net income — often called the "bottom line" — is what remains after every expense is subtracted from revenue: cost of goods sold, operating expenses, interest, and taxes. It is the single clearest measure of whether a business is actually profitable, and it is the figure that flows from your income statement to your balance sheet and tax return.

Reading down a P&L in order tells a story. Gross profit shows product-level profitability. Operating income (EBIT) shows how the core business performs before financing and tax. Pretax income factors in interest, and net income reflects the final result after tax. Watching where the biggest drops happen between these lines tells you exactly where your profit is going.

Net Income Formula

Gross Profit = Revenue − COGS

Operating Income (EBIT) = Gross Profit − Operating Expenses

Pretax Income = EBIT − Interest

Net Income = Pretax Income − (Pretax Income × Tax Rate)

Example Calculation

Revenue $500,000, COGS $200,000, operating expenses $180,000, interest $10,000, tax rate 21%:

Gross profit = $500,000 − $200,000 = $300,000
EBIT = $300,000 − $180,000 = $120,000
Pretax income = $120,000 − $10,000 = $110,000
Net income = $110,000 − ($110,000 × 21%) = $86,900

Common Mistakes to Avoid

Confusing net income with cash flow. A profitable business can still run out of cash; net income is not the same as money in the bank.
Forgetting non-operating items. Interest and one-time charges belong below EBIT, not in operating expenses.
Using the wrong tax rate. Your effective rate may differ from the headline rate due to deductions and credits.
Miscategorizing COGS vs operating expenses. This distorts gross margin and EBIT.
Ignoring owner compensation. If you do not pay yourself a market wage, net income overstates true profitability.

Net Income for Small Business & Startups

Net income is the number your lender, investor, and the IRS all care about — and it is only as reliable as the bookkeeping behind it. Misclassified expenses, missing accruals, or sloppy categorization can make a healthy business look unprofitable (or hide a real problem). Clean, accurate books are what make this number trustworthy.

That is the everyday work of a good bookkeeper and the strategic focus of a fractional CFO: making sure every line of your P&L is right, then using it to improve the bottom line. If you want confidence that your net income reflects reality — and ideas for improving it — we are happy to help.

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Frequently Asked Questions

What is the difference between net income and gross profit?

Gross profit is revenue minus only the cost of goods sold. Net income is what remains after also subtracting operating expenses, interest, and taxes. Gross profit measures product profitability; net income measures whole-business profitability.

Is net income the same as profit?

Net income is the most complete measure of profit — the bottom line after all costs. People sometimes use 'profit' loosely to mean gross or operating profit, so it is worth being specific about which line you mean.

Is net income the same as cash flow?

No. Net income is an accounting measure that includes non-cash items and accruals. A business can show positive net income while running low on cash, which is why cash flow is tracked separately.

What tax rate should I use?

Use your effective income tax rate. The US federal corporate rate is 21%, but pass-through entities are taxed at the owner's individual rate, and state taxes vary. For an accurate figure, check with your accountant.

Why is my net income lower than expected?

Common causes are higher-than-realized COGS, overhead creep in operating expenses, interest costs, or taxes. Working down each line of the P&L shows exactly where the profit is being lost.