Net Of Tax

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DEFINITION of 'Net Of Tax'

An accounting figure that has been adjusted for the effects of income tax. Net of tax is most commonly calculated by taking gross figures, like the cash collected from the sale of an asset, and subtracting the taxes paid. Net of tax could also be used to show the final amount after accounting for the tax savings, for example on a loss that allows a tax deduction.

BREAKING DOWN 'Net Of Tax'

In most cases, net of tax figures are used for the sake of clarity. If a company sells one of its factories for $1 million, but $400,000 of that is eaten up by taxes, the company may present the net of tax figure of $600,000 because that is the amount being added to the bottom line. The tax figure doesn't disappear, however, as it will be accounted for in the gross figure given for income tax expense, and may be referred to specifically if it was a significant contributor to an unusually high tax bill.

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