We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Before-Tax Income?

Tricia Christensen
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Before-tax income is quite simply the income a business or private individual makes prior to taxes being deducted. This may also be called pre-tax income or gross income. There are several reasons why understanding the before-tax income can be important.

If you’re a shareholder in a company and want to figure your profits, you’ll be off if you only consider the before-tax income. Profits or stock payouts are based on the money made after taxes, so you’ll need to evaluate just how much money a company will make after they have paid their yearly taxes. This can be a little difficult, since companies may list their profits as before-tax income, instead of profits after taxes. You can of course ask the company for a statement of net income after taxes, which if you’re a shareholder, they usually must provide to you within a few weeks. For those who like to double check the numbers to be certain their profits or payouts are assessed correctly, you need to always understand the nature of a report on profits, and whether profit is listed as before-tax or after.

For the private individual, especially for anyone who is budgeting, it’s wise to understand how companies like rental agencies, lenders, and mortgage companies assess your income. Most assessments are based on before-tax income, but this is not a reflection of what money you actually take home. When you’re deciding whether you can afford to pay a mortgage payment or a certain amount on a monthly credit card, you should always evaluate the money you actually make, and not the money you make before taxes.

It may also be detrimental to people who make smaller incomes to have their before-tax income analyzed as a basis for qualification for college funding, grants, free or reduced lunch programs, or government health care. Some people make money just above the poverty line, but pay enough in taxes to actually be below the poverty line. It’s valuable to understand the differences between income before and after taxes if you’d like to attempt to argue that you qualify for specific financial aid programs due to the amount of taxes you paid.

Taxes are not only based on how much money you make but also the number of deductions you can take. A family with one child that makes the same amount as a family with several children will pay higher taxes. With lower income, this might indeed put you into a bracket where you qualify for certain financial benefits, if you’re paying higher taxes.

Additionally, you might look at the before tax income as a means of gauging whether you could save money on taxes by making retirement investments. If your income is in a higher bracket, you may be able to reduce this by contributing to a 401k or IRA account. These deductions are taken out prior to evaluation of before tax income analysis and may overall reduce your tax payments or put your income in a lower tax bracket.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Tricia Christensen
By Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.
Discussion Comments
By JessiC — On Apr 17, 2011

I know that some government agencies use your net and some use your gross to determine benefits. Some use a combination of both. One way or the other, seeing what a person actually brings home compared to what they make can be a little more than heartbreaking. Your income before income taxes is so much prettier than it is after.

Tricia Christensen
Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.