Net income, also known as net earnings, is income received after mandatory withholdings and deductions, such as state and federal income tax and Social Security contributions. Specifically, net income is gross income minus these mandatory withholdings and deductions. For a business, net income is calculated as sales minus the cost of goods sold, general expenses, operating expenses, depreciation, interest, taxes, and other expenses. Interest on debt is another possible deduction that should be accounted for in net income.
See also: net earnings, gross income
[Last updated in July of 2023 by the Wex Definitions Team]
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