Small Business Profit and Loss Calculator
A profit and loss statement (P&L, or income statement) answers one question: after everything you spent, did the business make money? Enter your sales and costs for a month, a quarter or a year and see your gross profit, net profit and margins, laid out the way a P&L is.
2026 self-employment tax figuresYour profit and loss
How a profit and loss statement works
- Start with net sales. Sales minus returns and refunds is what customers actually paid you for. Leave out sales tax you collected: it belongs to the state, not to you.
- Gross profit is net sales minus the cost of goods sold: what you paid for the inventory or materials in the things you sold. Your gross margin (gross profit as a percent of net sales) shows whether your prices cover what you sell.
- Operating expenses are everything else it takes to run the business: advertising, platform and payment fees, shipping, supplies, software, rent, contract labor and car costs (or the mileage deduction).
- Net profit is gross profit plus any other business income, minus operating expenses. It is the number your taxes are based on, and your net margin shows how much of each sales dollar you keep.
- Self-employment tax comes out of that profit if you are a sole proprietor or single-member LLC: 15.3% of 92.35% of net profit (12.4% Social Security up to the $184,500 2026 wage base, plus 2.9% Medicare). It applies once net earnings reach $400 for the year. Income tax is on top; the quarterly estimated tax calculator works out both.
Worked example
Example. A small online shop sold $48,000 last year and refunded $1,200. The inventory and materials in what it sold cost $14,500. Here is its profit and loss statement:
| Profit and loss | Year |
|---|---|
| Sales | $48,000 |
| Returns & refunds | -$1,200 |
| Net sales | $46,800 |
| Cost of goods sold | -$14,500 |
| Gross profit | $32,300 (69.0%) |
| Advertising & marketing | -$2,400 |
| Platform & payment fees | -$3,900 |
| Shipping & postage | -$4,100 |
| Supplies & packaging | -$1,350 |
| Software & subscriptions | -$720 |
| Rent, storage & utilities | -$1,800 |
| Car & mileage | -$1,640 |
| Other expenses | -$450 |
| Total operating expenses | -$16,360 |
| Net profit | $15,940 (34.1%) |
The shop keeps 34.1% of every sales dollar as profit. As a sole proprietor, the owner owes $2,252.25 of self-employment tax on $15,940 of profit, leaving $13,687.75 before income tax.
Frequently asked questions
How do I calculate profit and loss for a small business?
Subtract returns and refunds from sales to get net sales, subtract the cost of goods sold to get gross profit, then subtract operating expenses (advertising, fees, shipping, supplies, rent and the rest) to get net profit. In the example above, $48,000 of sales becomes $15,940 of net profit.
What is the difference between gross profit and net profit?
Gross profit only takes away what the products you sold cost you. Net profit also takes away the costs of running the business. A shop can have a healthy gross margin and still lose money if its expenses are too high.
What counts as cost of goods sold?
What you paid for the inventory or materials in the items you sold during the period, including shipping to get them to you. Unsold inventory is not a cost yet: it counts when the item sells.
What is a good profit margin for a small business?
There is no single answer: it depends on what you sell and how you sell it. A business that buys inventory has a lower gross margin than one that sells its own time. The most useful comparison is your own margin month to month: a falling margin is an early warning that fees, costs or discounts are eating your profit.
Are platform fees a business expense?
Yes. Etsy, eBay, Poshmark and other marketplace fees, and payment processing fees, are business expenses. The fee calculators on this site show what each platform takes from a sale.
Do I pay tax on gross profit or net profit?
On net profit. Both self-employment tax and income tax are figured on what is left after your business expenses, which is why recording every expense lowers your tax.
Does a loss lower my taxes?
A net loss means no self-employment tax for the year, and a sole proprietor's business loss can generally offset other income, subject to IRS limits. Check the rules for your situation with a tax professional.
Can I use this for a month or a quarter?
Yes, the P&L works for any period. The self-employment tax line treats the profit as a full year's, so for a shorter period use it only as a rough guide, or enter your whole year.
More calculators
Sources
IRS pages behind the 2026 figures, checked October 2026. The Social Security wage base ($184,500) is the Social Security Administration's 2026 contribution and benefit base.