How to Calculate Pre-Tax Profit With Net Income and Tax Rate

By Motley Fool Staff – Updated Apr 30, 2025 at 10:02PM

Key Points

Pre-tax profit is a firm's income before taxes, found on the income statement.
Calculate pre-tax profit by adjusting net income for the effective tax rate.
Alternatively, adjust operating income by adding/subtracting interest and unusual items.
Investor Alert: Our 10 best stocks to buy right now ›

Key findings are powered by ChatGPT and based solely off the content from this article. Findings are reviewed by our editorial team. The author and editors take ultimate responsibility for the content.

Pre-tax profit is a company's operating profit after interest on debt has been paid (plus any unusual items) -- but before taxes are paid.

A business person calculating profit from revenue.

Image source: Getty Images.

A company's pre-tax profit -- also known as "earnings before taxes," "EBT," or "income before provision for income taxes" -- can be found on its income statement. Your broker can help you sort through income statements -- if you don't have one yet, visit our Broker Center, and we'll help you get started.

How to calculate

You can also calculate a company's pre-tax profit if you know its net income and tax rate.

Net income is a company's earnings after taxes have been taken out. To get back from net income to pre-tax profits, we just have to put those taxes back in.

Here's net income:

Net Income = Earnings Before Taxes * (1-Effective Tax Rate)

With a little arithmetic, we get

Earnings Before Taxes = Net Income / (1-Effective Tax Rate)

Example

In 2015, Apple (AAPL -1.23%) had net income of $53.4 billion and an effective tax rate of roughly 26.1%. So, its pre-tax profit was approximately $72 billion, which corresponds to the amount listed in its income statement.

Apple's Earnings Before Taxes = $53,394 million / (1-26.1%)

Another method

Another way to calculate pre-tax profit

You can also calculate a company's pre-tax profit by subtracting a company's interest expense and adding or subtracting any unusual items from its operating income.

Here's how that would look in the example above:

Earnings Before Taxes = Operating Income +/- Interest Expense and Other Items

Apple's Earnings Before Taxes = $71,230 million + $1,285 million = $72,515 million