Net to gross calculator helps you see what some amount will be after we add the tax or before we deduct a tax (look below for an explanation, it's a bit tricky). As with all Omni calculators, the reverse calculation works perfectly fine, but you might find gross to net calculator's fields arrangement easier. In either case, it might be a good idea to read the net vs gross section to understand the difference between net and gross and why gross pay vs net pay may be calculated differently than gross price vs net price.
Net vs gross
As mentioned before, net is an amount before we add the tax (when the tax is added to the base amount, as with VAT or sales tax) or after we deduct it (as with the income tax). The distinction between the two ways is very important.
Consider two examples:
- you are a shop owner and you sell a huge chocolate bar for
$40. The sales tax or VAT (doesn't really matter in this case) is
25%. The gross price would be
$40 + 25% = $40 + $10 = $50. Net price is
$40, gross price is
$50and the tax is
- you perform a job and your gross pay is
$50. The income tax is
20%, so your net income is
$50 - 20% = $50 - $10 = $40.
In the 2nd example, we had the same gross and net amounts, but the tax percentage turned out to be different. All because in the first one the net price was the base for the tax calculation, while in the 2nd one it was the gross amount.
Gross pay vs net pay
The general distinction is simple - gross pay is an amount before taxes are paid. When they are, we have a lower amount - a net wage. The mechanism may be different from country to country. In the US medical, dental, life insurance, 401(k) are handled by the employer and are calculated at an earlier stage. In Poland, on the other hand, the difference between net and gross salary is much bigger - an employee needs to pay social security (split into medical, disability and retirement insurances), which are often higher than the income tax itself.
Gross profit vs net profit
Gross profit's definition is clear - it's sales revenues minus cost of goods sold. Sales revenue is the figure after customer discounts, returns and allowances are factored in. It's often expressed as a percentage. You may calculate it with our profit margin calculator. It's a partial measure of profitability, as it doesn't contain other costs (marketing, office upkeep, etc.).
Net profit, on the other hand, is a full measure of profitability - all costs are accounted for. That's why it's often called a bottom line.