Earnings before taxes


Earnings before tax, or pre-tax income, is the last subtotal found in the income statement before the penultimate net income line item. Earnings before tax is found after all deductions have been made against sales revenue. These deductions include COGS, SG&A, depreciation and amortization, and interest expense.

As the name implies, the last item to be deducted from EBT is taxes.


EBT = Sales Revenue – COGS – SG&A

           – Depreciation and Amortization

EBT = EBIT – Interest Expense

Relation to Taxes

Pre-tax income is the denominator involved when trying to find the effective tax rate a company is paying in any given period. The effective tax rate is found by dividing taxes paid with the pre-tax income. The effective tax rate is then used in conjunction with forecasted EBT to find forecasted taxes in projected income statements.