How to Calculate After Tax Earnings for a Corporation
A corporation’s after-tax earnings is the income remaining after the corporation’s expenses have been paid, including the tax on its revenue. The company’s after-tax earnings figure is used to determine earnings per share information for the corporation’s stockholders, and is also the income that is used to issue dividends to investors. After-tax earnings can be calculated based on the income statement of the corporation, or from the taxable income shown on the corporation’s income tax return.
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Instructions
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Calculate the net business income before taxes. Net income before taxes includes the corporation’s income, minus cost of goods sold, depreciation and any deductible expenses. The result is the corporation’s income subject to tax. Income and expense information is shown on the corporation’s income statement, and also on the federal corporate income tax return for the year, IRS Form 1120. When referencing taxable income on Form 1120, look at line 30.
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Calculate the corporation’s income tax. In general, regular corporations use the income tax rate table in the instructions for Form 1120. Form 1120 instructions are available for download on the irs.gov website. However, if you are a personal service corporation, your tax rate is 35 percent on all taxable income, regardless of the amount.
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Subtract the tax from the corporation’s net income subject to tax. The result is the after-tax earnings of the corporation.
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