Net Income Calculator
- Cost of goods sold
- Operating expenses
- Interest and other
- Income tax
- Net income
You keep 17.4% of every sales dollar. Compare it with prior periods, not just with other businesses.
How the net income calculation works
Your business's net income and net profit margin from revenue, costs, interest and tax.
Subtract cost of goods sold
Revenue minus COGS is gross profit. $500,000 − $200,000 = $300,000.
Subtract operating expenses
Rent, wages, marketing and the rest. $300,000 − $180,000 leaves $120,000 of operating income.
Subtract interest
Loan interest and other non-operating costs come next. $120,000 − $10,000 = $110,000 pre-tax.
Subtract income tax
At 21%, tax is $23,100, leaving $86,900 of net income: a 17.4% net margin.
Worked example. A business with $500,000 revenue, $200,000 COGS, $180,000 operating expenses and $10,000 interest has $110,000 pre-tax income. At a 21% tax rate it pays $23,100 and keeps $86,900 of net income, a 17.4% net profit margin.
Net Income FAQ
How do you calculate net income?
Net income = revenue − cost of goods sold − operating expenses − interest − taxes. It is the bottom line of the income statement.
What is the difference between gross income and net income?
Gross income (gross profit) is revenue minus only the direct cost of what you sold. Net income subtracts everything else as well: overhead, interest and tax.
What is a good net profit margin for a small business?
It varies widely by industry: grocery and restaurants often run in low single digits, while services and software can be far higher. Track your own margin over time and compare with businesses like yours.
What is the operating income formula?
Operating income (EBIT) = revenue − cost of goods sold − operating expenses. It is profit from running the business before interest and income tax. In the example, $500,000 − $200,000 − $180,000 = $120,000, a 24% operating margin.
Is net income the same as cash flow?
No. Net income counts revenue when earned and includes non-cash costs like depreciation, while cash flow tracks money in and out, including loan principal and inventory purchases.
Is this a take-home pay calculator?
No. It works out a business's profit after tax. For an employee's take-home pay from a salary, use a paycheck calculator that applies payroll withholding.