{"id":61255,"date":"2025-04-14T14:12:44","date_gmt":"2025-04-14T13:12:44","guid":{"rendered":"https:\/\/invoicefly.com\/?p=61255"},"modified":"2026-02-13T11:24:49","modified_gmt":"2026-02-13T10:24:49","slug":"calculate-net-income-freelancer","status":"publish","type":"post","link":"https:\/\/invoicefly.com\/academy\/calculate-net-income-freelancer\/","title":{"rendered":"How To Calculate Net Income for Freelancers?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"61255\" class=\"elementor elementor-61255\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-26c6632 e-flex e-con-boxed e-con e-parent\" data-id=\"26c6632\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-b462aa7 elementor-widget elementor-widget-text-editor\" data-id=\"b462aa7\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Are you working as a freelancer? Whether you\u2019re fixing roofs, painting houses, consulting, or juggling multiple gigs, it\u2019s important to understand how much money you\u2019re <\/span><i><span style=\"font-weight: 400;\">actually<\/span><\/i><span style=\"font-weight: 400;\"> taking home. Sure, it might feel great to land a big client or send out a hefty invoice\u2014but not all of that money is yours to keep.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">That\u2019s where net income comes in. Knowing your net income helps you see the full picture of your finances, from what you\u2019re earning to what you\u2019re spending. This guide will walk you through exactly how to calculate it\u2014in simple, clear steps that make it easy to follow, even if you\u2019re not a numbers person.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-ebc0706 e-flex e-con-boxed e-con e-parent\" data-id=\"ebc0706\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-720f5cf elementor-widget elementor-widget-heading\" data-id=\"720f5cf\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Gross Income Versus Net Income<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-559c0d8 elementor-widget elementor-widget-text-editor\" data-id=\"559c0d8\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Let&#8217;s clear up the difference between these two:<\/span><\/p><ul><li><b>Gross Income<\/b><span style=\"font-weight: 400;\"> is ALL the money you make before any expenses are taken out. It&#8217;s the total amount clients pay you.<\/span><\/li><li><b>Net Income<\/b><span style=\"font-weight: 400;\"> is what&#8217;s left after you subtract all expenses, costs, and taxes. This is the money you actually get to keep.<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">The difference between these two numbers can be pretty big for freelancers because you have to pay for so many business expenses yourself.<\/span><\/p><p><span style=\"font-weight: 400;\">For example, imagine you&#8217;re a freelance web designer who charged $5,000 to build a website for a client. <\/span><\/p><p><span style=\"font-weight: 400;\">That $5,000 is your gross income for this project. But to complete the project, you paid $200 for premium website templates, $100 for stock photos, $50 for a specialized plugin, and $150 for online advertising to find the client. You also spent $500 on your monthly software subscriptions, internet, and phone bill while working on the project. <\/span><\/p><p><span style=\"font-weight: 400;\">Plus, you need to set aside about $1,000 for taxes. After subtracting all these costs ($2,000 total) from your $5,000 gross income, your net income would be $3,000. So while your client paid you $5,000, you actually get to keep $3,000 as your profit. <\/span><\/p><p><span style=\"font-weight: 400;\">This is why understanding the difference between gross and net income is so important \u2013 that $5,000 might look great at first glance, but your actual earnings are significantly less.<\/span><\/p><p><span style=\"font-weight: 400;\">For a deeper understanding of this difference, check out our guide: <\/span><a href=\"https:\/\/invoicefly.com\/academy\/gross-profit-vs-net-profit\/\" target=\"_blank\" rel=\"noopener\"><i><span style=\"font-weight: 400;\">Gross Profit vs. Net Profit: What&#8217;s the Difference?<\/span><\/i><\/a><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-30209a2 e-flex e-con-boxed e-con e-parent\" data-id=\"30209a2\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-90fd3d6 elementor-widget elementor-widget-heading\" data-id=\"90fd3d6\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Components of the Net Income Formula<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ee6cdad elementor-widget elementor-widget-text-editor\" data-id=\"ee6cdad\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">To figure out your net income, you need to understand what goes into the calculation. Understanding these parts is like knowing how a <\/span><a href=\"https:\/\/invoicefly.com\/academy\/what-is-a-ledger-balance\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">ledger balance<\/span><\/a><span style=\"font-weight: 400;\"> works in accounting\u2014it gives you the full picture of your money situation.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-142ea0d e-flex e-con-boxed e-con e-parent\" data-id=\"142ea0d\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-5b62a85 elementor-widget elementor-widget-heading\" data-id=\"5b62a85\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">1. Revenue<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-c0b8aff elementor-widget elementor-widget-text-editor\" data-id=\"c0b8aff\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Revenue is all the money you earn from your freelance work before taking out any expenses:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Money from clients<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Consulting fees<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Royalties<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Money from affiliate links<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Any other business income<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Keep good records of all money coming in \u2013 write down the date, amount, client, and what you did to earn it.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-9f2faa0 e-flex e-con-boxed e-con e-parent\" data-id=\"9f2faa0\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-1b73092 elementor-widget elementor-widget-heading\" data-id=\"1b73092\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">2. Cost of Goods Sold (COGS)<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-5e5e3ca elementor-widget elementor-widget-text-editor\" data-id=\"5e5e3ca\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">COGS is what you spend directly to complete client projects:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Materials you buy for specific projects<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Money you pay other freelancers who help with your projects<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Production costs if you sell physical items<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Software or services you buy just for one client<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">If you mostly provide services, your COGS might be small, but it&#8217;s still good to track these costs separately.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-33d5c4e e-flex e-con-boxed e-con e-parent\" data-id=\"33d5c4e\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-9673db6 elementor-widget elementor-widget-heading\" data-id=\"9673db6\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">3. Total Expenses<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-20207f4 elementor-widget elementor-widget-text-editor\" data-id=\"20207f4\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Expenses are all the costs of running your freelance business:<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-ae92583 e-flex e-con-boxed e-con e-parent\" data-id=\"ae92583\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-8961c34 elementor-widget elementor-widget-heading\" data-id=\"8961c34\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h4 class=\"elementor-heading-title elementor-size-default\">3.1 Operating Expenses:<\/h4>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-c65e115 elementor-widget elementor-widget-text-editor\" data-id=\"c65e115\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">These are your day-to-day costs:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Home office costs (part of your rent\/mortgage, utilities)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Internet and phone bills<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Software subscriptions<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Website costs<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Office supplies<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Courses or books to improve your skills<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Money paid to accountants or lawyers<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Advertising<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business travel<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business meals<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Insurance<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-83a1e23 e-flex e-con-boxed e-con e-parent\" data-id=\"83a1e23\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-ad4d978 elementor-widget elementor-widget-heading\" data-id=\"ad4d978\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h4 class=\"elementor-heading-title elementor-size-default\">3.2 Capital Expenses<\/h4>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-f9789d7 elementor-widget elementor-widget-text-editor\" data-id=\"f9789d7\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">These are bigger, long-term purchases:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Computer equipment<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Office furniture<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Camera or other special equipment<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Car (if used for business)<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">These big purchases usually get &#8220;depreciated&#8221; \u2013 meaning you spread the cost over several years for tax purposes.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-d5336f0 e-flex e-con-boxed e-con e-parent\" data-id=\"d5336f0\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-1a7d324 elementor-widget elementor-widget-heading\" data-id=\"1a7d324\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h4 class=\"elementor-heading-title elementor-size-default\">3.3 Other Non-Operating Expenses and Taxes<\/h4>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a1ee84a elementor-widget elementor-widget-text-editor\" data-id=\"a1ee84a\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Other costs that affect your net income:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest on business loans<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Bank fees<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Self-employment taxes (about <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/self-employment-tax-social-security-and-medicare-taxes\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">15.3%<\/span><\/a><span style=\"font-weight: 400;\"> for Social Security and Medicare)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Quarterly tax payments<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">State and local taxes<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Health insurance<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Retirement contributions<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-aa133e0 elementor-widget__width-initial elementor-widget elementor-widget-template\" data-id=\"aa133e0\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"template.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-template\">\n\t\t\t\t\t<div data-elementor-type=\"container\" data-elementor-id=\"59657\" class=\"elementor elementor-59657\" data-elementor-post-type=\"elementor_library\">\n\t\t\t\t<div class=\"elementor-element elementor-element-8213c54 e-flex e-con-boxed e-con e-parent\" data-id=\"8213c54\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div data-wrapper-link=\"{&quot;url&quot;:&quot;https:\\\/\\\/invoicefly.onelink.me\\\/AeUs\\\/qohijf8g&quot;,&quot;is_external&quot;:&quot;on&quot;,&quot;nofollow&quot;:&quot;&quot;,&quot;custom_attributes&quot;:&quot;&quot;}\" style=\"cursor: pointer\" class=\"elementor-element elementor-element-8482853 elementor-widget elementor-widget-image\" data-id=\"8482853\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"image.default\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"341\" src=\"https:\/\/invoicefly.com\/wp-content\/uploads\/2024\/08\/Invoice-Fly-Blog-Banner-02-1024x341.jpg\" class=\"attachment-large size-large wp-image-28042\" alt=\"Download Invoice Fly Today!\" srcset=\"https:\/\/invoicefly.com\/wp-content\/uploads\/2024\/08\/Invoice-Fly-Blog-Banner-02-1024x341.jpg 1024w, https:\/\/invoicefly.com\/wp-content\/uploads\/2024\/08\/Invoice-Fly-Blog-Banner-02-300x100.jpg 300w, https:\/\/invoicefly.com\/wp-content\/uploads\/2024\/08\/Invoice-Fly-Blog-Banner-02-768x256.jpg 768w, https:\/\/invoicefly.com\/wp-content\/uploads\/2024\/08\/Invoice-Fly-Blog-Banner-02-710x237.jpg 710w, https:\/\/invoicefly.com\/wp-content\/uploads\/2024\/08\/Invoice-Fly-Blog-Banner-02.jpg 1050w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-6b98b5a e-flex e-con-boxed e-con e-parent\" data-id=\"6b98b5a\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-964e33b elementor-widget elementor-widget-heading\" data-id=\"964e33b\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">The Net Income Formula<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7d6bdd9 elementor-widget elementor-widget-text-editor\" data-id=\"7d6bdd9\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Here&#8217;s the simple formula for calculating net income:<\/span><\/p><p><b>Net Income = Revenue &#8211; (Cost of Goods Sold + Total Expenses + Taxes)<\/b><\/p><p><span style=\"font-weight: 400;\">This formula is a key part of your financial calculations, just like understanding your <\/span><a href=\"https:\/\/invoicefly.com\/academy\/break-even-point-formula\/\"><span style=\"font-weight: 400;\">break-even point<\/span><\/a><span style=\"font-weight: 400;\"> helps you know when your business becomes profitable.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-eb04d6d e-flex e-con-boxed e-con e-parent\" data-id=\"eb04d6d\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-7d17505 elementor-widget elementor-widget-heading\" data-id=\"7d17505\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">The Gross Income Formula<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-f503c46 elementor-widget elementor-widget-text-editor\" data-id=\"f503c46\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Before figuring out net income, you&#8217;ll need to calculate your gross income:<\/span><\/p><p><b>Gross Income = Revenue &#8211; Cost of Goods Sold<\/b><\/p><p><span style=\"font-weight: 400;\">This step helps you see how much you&#8217;re making before other business expenses.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-6db9f3c e-flex e-con-boxed e-con e-parent\" data-id=\"6db9f3c\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-d85fd12 elementor-widget elementor-widget-heading\" data-id=\"d85fd12\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">How to Calculate Net Income in 3 Easy Steps<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-d007be5 elementor-widget elementor-widget-text-editor\" data-id=\"d007be5\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Follow these simple steps to figure out your net income:<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-9910132 e-flex e-con-boxed e-con e-parent\" data-id=\"9910132\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-8d7374b elementor-widget elementor-widget-heading\" data-id=\"8d7374b\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">1. Identify Revenue, Cost of Goods Sold, and Total Expenses<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-e75b2a4 elementor-widget elementor-widget-text-editor\" data-id=\"e75b2a4\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Gather all your financial records for the month, quarter, or year:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Client invoices and payment records<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Receipts for all business expenses<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Bank and credit card statements<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Previous tax returns (for reference)<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Group your income sources and expenses into categories to make things easier.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-ba8b49a e-flex e-con-boxed e-con e-parent\" data-id=\"ba8b49a\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-3ba7a15 elementor-widget elementor-widget-heading\" data-id=\"3ba7a15\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">2. Subtract COGS and Expenses from Revenue<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2314366 elementor-widget elementor-widget-text-editor\" data-id=\"2314366\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Once you have everything organized:<\/span><\/p><ol><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Add up all the money you earned from freelance work and other business sources.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Add up your cost of goods sold.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Calculate your gross income by subtracting COGS from revenue.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Add up all your operating expenses, capital expenses, and other expenses.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Include your estimated taxes or actual tax payments.<\/span><\/li><\/ol>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-2644ba7 e-flex e-con-boxed e-con e-parent\" data-id=\"2644ba7\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-8703a2f elementor-widget elementor-widget-heading\" data-id=\"8703a2f\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">3. Calculate and Verify Net Income<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-45e36e3 elementor-widget elementor-widget-text-editor\" data-id=\"45e36e3\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Use the net income formula:<\/span><\/p><p><b>Net Income = Revenue &#8211; (COGS + Total Expenses + Taxes)<\/b><\/p><p><span style=\"font-weight: 400;\">After calculating your net income, double-check your work by:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Comparing it to previous months or quarters<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Making sure you didn&#8217;t miss any expenses or income<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Making sure you included all tax considerations<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-4274ad0 e-flex e-con-boxed e-con e-parent\" data-id=\"4274ad0\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-486424c elementor-widget elementor-widget-heading\" data-id=\"486424c\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Net Income Calculation Example<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ded405f elementor-widget elementor-widget-text-editor\" data-id=\"ded405f\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Let&#8217;s look at a simple example for a freelance graphic designer for one month:<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-c3afd2a e-flex e-con-boxed e-con e-parent\" data-id=\"c3afd2a\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-059bdd9 elementor-widget elementor-widget-heading\" data-id=\"059bdd9\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">1. Revenue<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-743110f elementor-widget elementor-widget-text-editor\" data-id=\"743110f\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Client A: $3,000<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Client B: $2,500<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Client C: $1,500<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Total Revenue: $7,000<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-e0e19f2 e-flex e-con-boxed e-con e-parent\" data-id=\"e0e19f2\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-9ffd90d elementor-widget elementor-widget-heading\" data-id=\"9ffd90d\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">2. Cost of Goods Sold<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-277c415 elementor-widget elementor-widget-text-editor\" data-id=\"277c415\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Stock photos for client projects: $100<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Special font purchase for Client B: $50<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Logo work hired out to another designer: $300<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Total COGS: $450<\/span><\/li><\/ul><p><b>Gross Income:<\/b><span style=\"font-weight: 400;\"> $7,000 &#8211; $450 = $6,550<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-66b8d5b e-flex e-con-boxed e-con e-parent\" data-id=\"66b8d5b\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-b6613f0 elementor-widget elementor-widget-heading\" data-id=\"b6613f0\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">3. Operating Expenses<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-be2d1ab elementor-widget elementor-widget-text-editor\" data-id=\"be2d1ab\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Home office (25% of $1,200 rent): $300<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Internet and phone: $120<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Design software subscription: $55<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Website hosting: $20<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Professional membership: $25<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Advertising: $100<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Total Operating Expenses: $620<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-c6c48b9 e-flex e-con-boxed e-con e-parent\" data-id=\"c6c48b9\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-f9a1040 elementor-widget elementor-widget-heading\" data-id=\"f9a1040\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">4. Other Expenses<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-8d44b09 elementor-widget elementor-widget-text-editor\" data-id=\"8d44b09\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Computer depreciation (monthly portion): $75<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business insurance: $50<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Health insurance: $350<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Money set aside for taxes: $1,400<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Total Other Expenses: $1,875<\/span><\/li><\/ul><p><b>Net Income Calculation:<\/b><span style=\"font-weight: 400;\"> $7,000 &#8211; ($450 + $620 + $1,875) = $4,055<\/span><\/p><p><span style=\"font-weight: 400;\">So, in this example, the freelance graphic designer&#8217;s net income for the month is $4,055.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-8a534df e-flex e-con-boxed e-con e-parent\" data-id=\"8a534df\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-43b66e5 elementor-widget elementor-widget-heading\" data-id=\"43b66e5\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Recording Your Net Income<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-44a933c elementor-widget elementor-widget-text-editor\" data-id=\"44a933c\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Keeping track of your net income over time is super important. You might use:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Accounting software like QuickBooks, FreshBooks, or Wave<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Spreadsheet templates made for freelancers<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Regular money check-ups (monthly, quarterly, and yearly)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Our <\/span><a href=\"https:\/\/invoicefly.com\/free-resources\/free-generators\/free-invoice-generator\/\"><span style=\"font-weight: 400;\">Invoice Maker<\/span><\/a><span style=\"font-weight: 400;\"> to properly track money from clients<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Good record-keeping isn&#8217;t just important for calculating net income \u2013 it also helps you create accurate <\/span><a href=\"https:\/\/invoicefly.com\/academy\/what-is-a-pay-stub\/\"><span style=\"font-weight: 400;\">pay stubs<\/span><\/a><span style=\"font-weight: 400;\"> if you need to prove your income when renting an apartment or applying for a loan.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-2688a24 e-flex e-con-boxed e-con e-parent\" data-id=\"2688a24\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-36c824f elementor-widget elementor-widget-heading\" data-id=\"36c824f\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">What Does Positive Net Income Mean?<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-5a4a300 elementor-widget elementor-widget-text-editor\" data-id=\"5a4a300\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">If your net income is positive, congratulations! Your business is making money. You&#8217;re earning more than you&#8217;re spending. This means you can:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Save money<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Put money back into your business<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Pay off debt<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Pay yourself<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-c14a155 e-flex e-con-boxed e-con e-parent\" data-id=\"c14a155\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-abcd696 elementor-widget elementor-widget-heading\" data-id=\"abcd696\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">What Does Negative Net Income Mean?<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-d3aa0d4 elementor-widget elementor-widget-text-editor\" data-id=\"d3aa0d4\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">If your net income is negative (you have a net loss), you&#8217;re spending more than you&#8217;re earning. This can happen sometimes, especially when you make big investments in your business. But if it keeps happening, you might need to:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Raise your rates<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Find more clients<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cut unnecessary expenses<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Rethink your business approach<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-4e9bfc6 e-flex e-con-boxed e-con e-parent\" data-id=\"4e9bfc6\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-c32ab4b elementor-widget elementor-widget-heading\" data-id=\"c32ab4b\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Understanding Your Net Income<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0476402 elementor-widget elementor-widget-text-editor\" data-id=\"0476402\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Beyond just calculating the number, it helps to analyze your net income:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Net Profit Margin:<\/b><span style=\"font-weight: 400;\"> Divide your net income by your revenue and multiply by 100. For example, if your net income is $4,055 on $7,000 revenue, your net profit margin is 57.9%. This helps you compare how profitable you are regardless of how much you earn.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Income Trends:<\/b><span style=\"font-weight: 400;\"> Track your net income over time to see seasonal patterns or growth.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Expense Ratio:<\/b><span style=\"font-weight: 400;\"> Figure out what percentage of your revenue goes to different expense categories to see where you might be spending too much.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Industry Benchmarks:<\/b><span style=\"font-weight: 400;\"> Look up average profit margins in your industry to see how your business compares.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Financial Projections:<\/b><span style=\"font-weight: 400;\"> Once you have a solid grasp of your net income, you can use it to plan for the future. Creating projections helps you estimate income, expenses, and profit over time.<\/span><\/li><\/ul><p><b>Tip! <\/b><a href=\"https:\/\/invoicefly.com\/academy\/how-to-create-financial-projections\/\">Here\u2019s a simple, step-by-step guide on how to build your own financial projection<\/a><span style=\"font-weight: 400;\"> so you can map out where your freelance business is headed.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-47a8eb0 e-flex e-con-boxed e-con e-parent\" data-id=\"47a8eb0\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-c57dd9d elementor-widget elementor-widget-heading\" data-id=\"c57dd9d\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Final Thoughts<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-fc76eea elementor-widget elementor-widget-text-editor\" data-id=\"fc76eea\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Understanding how to calculate and keep track of your net income is super important if you want your freelance business to succeed. When you know this number, you can make better decisions about your prices, expenses, and growth opportunities.<\/span><\/p><p><span style=\"font-weight: 400;\">Remember that calculating net income isn&#8217;t just about knowing where you stand financially\u2014it&#8217;s about using that information to keep improving your business. When you understand your bottom line, you can confidently handle the ups and downs of freelance work while building long-term financial stability.<\/span><\/p><p><span style=\"font-weight: 400;\">Regularly checking your net income and planning your finances will help make sure your freelance career stays both personally satisfying and financially rewarding for years to come.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-134379f e-flex e-con-boxed e-con e-parent\" data-id=\"134379f\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-82566f9 elementor-widget elementor-widget-heading\" data-id=\"82566f9\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"heading.default\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">FAQs about Calculating Net Income For Freelancers<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7128b8f elementor-widget__width-initial elementor-widget elementor-widget-elementskit-accordion\" data-id=\"7128b8f\" data-element_type=\"widget\" data-e-type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"elementskit-accordion.default\">\n\t\t\t\t\t<div class=\"ekit-wid-con\" >\n        <div class=\"elementskit-accordion accoedion-primary\" id=\"accordion-6a59bbad6e3cd\">\n\n            \n                <div class=\"elementskit-card active\">\n                    <div class=\"elementskit-card-header\" id=\"primaryHeading-0-7128b8f\">\n                        <a href=\"#collapse-8065b3c6a59bbad6e3cd\" class=\"ekit-accordion--toggler elementskit-btn-link collapsed\" data-ekit-toggle=\"collapse\" data-target=\"#Collapse-8065b3c6a59bbad6e3cd\" aria-expanded=\"true\" aria-controls=\"Collapse-8065b3c6a59bbad6e3cd\">\n                            \n                            <span class=\"ekit-accordion-title\">1. How often should I calculate my net income?<\/span>\n\n                            \n                                <div class=\"ekit_accordion_icon_group\">\n                                    <div class=\"ekit_accordion_normal_icon\">\n                                        <!-- Normal Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-down-arrow1\"><\/i>                                    <\/div>\n\n                                    <div class=\"ekit_accordion_active_icon\">\n                                        <!-- Active Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-up-arrow\"><\/i>                                    <\/div>\n                                <\/div>\n\n                            \n                                                    <\/a>\n                    <\/div>\n\n                    <div id=\"Collapse-8065b3c6a59bbad6e3cd\" class=\" show collapse\" aria-labelledby=\"primaryHeading-0-7128b8f\" data-parent=\"#accordion-6a59bbad6e3cd\">\n\n                        <div class=\"elementskit-card-body ekit-accordion--content\">\n                            <p><span style=\"font-weight: 400\">It's best to check your net income monthly to stay on top of your finances. Also do quarterly reviews when you make estimated tax payments, and a yearly review when you file taxes.<\/span><\/p>                        <\/div>\n\n                    <\/div>\n\n                <\/div><!-- .elementskit-card END -->\n\n                \n                <div class=\"elementskit-card active\">\n                    <div class=\"elementskit-card-header\" id=\"primaryHeading-1-7128b8f\">\n                        <a href=\"#collapse-f81816a6a59bbad6e3cd\" class=\"ekit-accordion--toggler elementskit-btn-link collapsed\" data-ekit-toggle=\"collapse\" data-target=\"#Collapse-f81816a6a59bbad6e3cd\" aria-expanded=\"true\" aria-controls=\"Collapse-f81816a6a59bbad6e3cd\">\n                            \n                            <span class=\"ekit-accordion-title\">2. Should I include my personal expenses when calculating net income?<\/span>\n\n                            \n                                <div class=\"ekit_accordion_icon_group\">\n                                    <div class=\"ekit_accordion_normal_icon\">\n                                        <!-- Normal Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-down-arrow1\"><\/i>                                    <\/div>\n\n                                    <div class=\"ekit_accordion_active_icon\">\n                                        <!-- Active Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-up-arrow\"><\/i>                                    <\/div>\n                                <\/div>\n\n                            \n                                                    <\/a>\n                    <\/div>\n\n                    <div id=\"Collapse-f81816a6a59bbad6e3cd\" class=\" show collapse\" aria-labelledby=\"primaryHeading-1-7128b8f\" data-parent=\"#accordion-6a59bbad6e3cd\">\n\n                        <div class=\"elementskit-card-body ekit-accordion--content\">\n                            <p><span style=\"font-weight: 400\">No. According to the <\/span><a href=\"https:\/\/www.irs.gov\/faqs\/small-business-self-employed-other-business\/income-expenses\"><span style=\"font-weight: 400\">IRS<\/span><\/a><span style=\"font-weight: 400\">, only include business expenses that are legitimate tax deductions for your freelance work. Keep your personal and business money separate.\u00a0<\/span><\/p>                        <\/div>\n\n                    <\/div>\n\n                <\/div><!-- .elementskit-card END -->\n\n                \n                <div class=\"elementskit-card active\">\n                    <div class=\"elementskit-card-header\" id=\"primaryHeading-2-7128b8f\">\n                        <a href=\"#collapse-7276b156a59bbad6e3cd\" class=\"ekit-accordion--toggler elementskit-btn-link collapsed\" data-ekit-toggle=\"collapse\" data-target=\"#Collapse-7276b156a59bbad6e3cd\" aria-expanded=\"true\" aria-controls=\"Collapse-7276b156a59bbad6e3cd\">\n                            \n                            <span class=\"ekit-accordion-title\">3. How does net income affect my taxes?<\/span>\n\n                            \n                                <div class=\"ekit_accordion_icon_group\">\n                                    <div class=\"ekit_accordion_normal_icon\">\n                                        <!-- Normal Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-down-arrow1\"><\/i>                                    <\/div>\n\n                                    <div class=\"ekit_accordion_active_icon\">\n                                        <!-- Active Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-up-arrow\"><\/i>                                    <\/div>\n                                <\/div>\n\n                            \n                                                    <\/a>\n                    <\/div>\n\n                    <div id=\"Collapse-7276b156a59bbad6e3cd\" class=\" show collapse\" aria-labelledby=\"primaryHeading-2-7128b8f\" data-parent=\"#accordion-6a59bbad6e3cd\">\n\n                        <div class=\"elementskit-card-body ekit-accordion--content\">\n                            <p><span style=\"font-weight: 400\">Your net income is the basis for your self-employment income, which determines how much tax you'll pay. Higher net income means higher taxes, but it also means your business is doing better!<\/span><\/p>                        <\/div>\n\n                    <\/div>\n\n                <\/div><!-- .elementskit-card END -->\n\n                \n                <div class=\"elementskit-card active\">\n                    <div class=\"elementskit-card-header\" id=\"primaryHeading-3-7128b8f\">\n                        <a href=\"#collapse-775155f6a59bbad6e3cd\" class=\"ekit-accordion--toggler elementskit-btn-link collapsed\" data-ekit-toggle=\"collapse\" data-target=\"#Collapse-775155f6a59bbad6e3cd\" aria-expanded=\"true\" aria-controls=\"Collapse-775155f6a59bbad6e3cd\">\n                            \n                            <span class=\"ekit-accordion-title\">4. How do payment terms affect my taxes?<\/span>\n\n                            \n                                <div class=\"ekit_accordion_icon_group\">\n                                    <div class=\"ekit_accordion_normal_icon\">\n                                        <!-- Normal Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-down-arrow1\"><\/i>                                    <\/div>\n\n                                    <div class=\"ekit_accordion_active_icon\">\n                                        <!-- Active Icon -->\n\t\t\t\t\t\t\t\t\t\t<i class=\"icon icon-up-arrow\"><\/i>                                    <\/div>\n                                <\/div>\n\n                            \n                                                    <\/a>\n                    <\/div>\n\n                    <div id=\"Collapse-775155f6a59bbad6e3cd\" class=\" show collapse\" aria-labelledby=\"primaryHeading-3-7128b8f\" data-parent=\"#accordion-6a59bbad6e3cd\">\n\n                        <div class=\"elementskit-card-body ekit-accordion--content\">\n                            <p><span style=\"font-weight: 400\">For most freelancers using cash-basis accounting, income only counts when you actually receive it. So if you send an invoice in December with net 30 terms, but get paid in January, that money counts toward the new year's income.<\/span><\/p>                        <\/div>\n\n                    <\/div>\n\n                <\/div><!-- .elementskit-card END -->\n\n                                                        <script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"mainEntity\":[{\"@type\":\"Question\",\"name\":\"1. How often should I calculate my net income?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"<p><span style=\\\"font-weight: 400\\\">It's best to check your net income monthly to stay on top of your finances. Also do quarterly reviews when you make estimated tax payments, and a yearly review when you file taxes.<\/span><\/p>\"}},{\"@type\":\"Question\",\"name\":\"2. 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Sure, it might feel great to land a big client or send out a hefty invoice\u2014but not all of that money is yours to keep.\u00a0 That\u2019s where [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":62175,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[158,156],"tags":[],"ppma_author":[100],"class_list":["post-61255","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-management","category-manage-your-business","author-jennifer-allerson"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Learn How To Calculate Net Income for Freelancers In 2025 | Invoice Fly<\/title>\n<meta name=\"description\" content=\"Quickly learn to calculate net income freelancer for accurate financial 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Content Strategy: Aligning content with business goals","user journeys","and brand identity for maximum impact."],"knowsLanguage":["English","Spanish"],"jobTitle":"Senior Copywriter and Content Strategist","worksFor":"Senior Copywriter and Content Strategist","url":"https:\/\/invoicefly.com\/academy\/author\/jennifer-allerson\/"}]}},"authors":[{"term_id":100,"user_id":7,"is_guest":0,"slug":"jennifer-allerson","display_name":"Jennifer Allerson","avatar_url":{"url":"https:\/\/invoicefly.com\/wp-content\/uploads\/2026\/07\/jennifer-allerson-profile.webp","url2x":"https:\/\/invoicefly.com\/wp-content\/uploads\/2026\/07\/jennifer-allerson-profile.webp"},"author_category":"1","first_name":"Jennifer","last_name":"Allerson","user_url":"https:\/\/www.jenallerson.com","job_title":"Senior Copywriter","description":"<strong>Jennifer Allerson is a Senior Copywriter specialising in business, finance and UX content, and the writer behind Invoice Fly Academy's guides on contracts, invoicing, estimates and pricing for contractors.<\/strong> She has spent more than ten years turning complex business and financial topics into clear, practical advice for small business owners.\r\n\r\n<ul>\r\n<li>Copywriter for global brands including <strong>Nespresso, San Pellegrino and SEAT<\/strong>, through Ogilvy<\/li>\r\n<li>Former <strong>VP of Brand &amp; Communications at Qustodio<\/strong> and Head of Communications at Fon<\/li>\r\n<li>Fintech experience as <strong>UX writer for Juni<\/strong>, a B2B financial platform<\/li>\r\n<li>Taught UX Writing at the <strong>Barcelona Technology School<\/strong> (University of Barcelona)<\/li>\r\n<li>Former Accenture programmer \u00b7 <strong>MBA, Stockholm School of Economics<\/strong><\/li>\r\n<\/ul>\r\n\r\nEvery guide Jennifer writes is researched from primary sources and reviewed under the <a href=\"https:\/\/invoicefly.com\/editorial-policy\/\">Invoice Fly editorial policy<\/a>. Connect with her on <a href=\"https:\/\/www.linkedin.com\/in\/jenallerson\/\" target=\"_blank\" rel=\"noopener\">LinkedIn<\/a> or at <a href=\"https:\/\/www.jenallerson.com\" target=\"_blank\" rel=\"noopener\">jenallerson.com<\/a>."}],"_links":{"self":[{"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/posts\/61255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/comments?post=61255"}],"version-history":[{"count":1,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/posts\/61255\/revisions"}],"predecessor-version":[{"id":88862,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/posts\/61255\/revisions\/88862"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/media\/62175"}],"wp:attachment":[{"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/media?parent=61255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/categories?post=61255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/tags?post=61255"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/invoicefly.com\/wp-json\/wp\/v2\/ppma_author?post=61255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}