Pretax Income

Category

Income Statement

Units

Currency

US-GAAP elements

IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterestIncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments

Reference

Regulation S-X Rule 5-03.10 (Income or loss before income tax expense and appropriate items below)

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Pretax income is a company's profit or loss from continuing operations before income tax expense. It reflects every item of revenue and expense for the ongoing business, including interest and non-operating gains and losses, but not taxes on income or the results of discontinued operations.

It is also called income before taxes or earnings before tax (EBT). Subtracting income tax expense from it gives income from continuing operations.

Regulation S-X Rule 5-03.10 lists income or loss before income tax expense as its own caption, directly after non-operating items and before the tax line. The usual XBRL element is IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, which the SEC defines as including income from equity-method investments. Companies that present equity-method income after the tax line, as S-X caption 12 contemplates, report their pretax subtotal as IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments instead. The two can differ by the full amount of affiliate income, so check which one a company uses.

Pretax income sits between operating income and net income, and its gap from operating income shows the combined effect of interest, investment results, currency effects, and other non-operating items. Companies also split pretax income between domestic and foreign sources in the tax footnote, which helps explain the effective tax rate.

Pretax income is the base of two widely used measures. Pretax margin, which GeminIQ calculates as trailing twelve-month pretax income divided by trailing twelve-month revenue, compares profitability across companies without the effect of different tax positions. The effective tax rate divides income tax expense by pretax income. Because tax rates can vary with credits, jurisdictions, and one-time items, comparing companies on a pretax basis often gives a clearer picture of operating and financing performance than comparing net income.