Net Income Calculator
Use this free net income calculator to work down your P&L from revenue to net income. Enter revenue, COGS, operating expenses, interest, and taxes to see gross profit, operating income (EBIT), pretax income, net income, and net margin.
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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 − COGSOperating Income (EBIT) = Gross Profit − Operating ExpensesPretax Income = EBIT − InterestNet 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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