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.
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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 -2.51%) 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