how is profit before tax calculated 
understanding the income statement can help an analyst to have a better understanding of pbt its calculation and its uses the third section of the income statement focuses in on interest and tax these deductions are taken from the summation of the second section which results in operating profit ebit interest is an important metric that includes both a company s interest from investments as well as interest paid out for leverage following the implementation of the tax cuts and jobs act tcja all c corporations have a federal tax rate of 21 1 all other companies are pass throughs which means they are taxed at the individual taxpayer s rate 2 any kind of entity will also have to pay state taxes state tax rates can vary widely by state and entity type the basics of calculating pbt are simple take the operating profit from the income statement and subtract any interest payments then add any interest earned pbt is generally the first step in calculating net profit but it excludes the subtraction of taxes to calculate it in reverse you can also add taxes back into the net income as mentioned above different types of companies will have different tax obligations at the federal and state level calculating the actual amount of taxes owed will come from the pbt 