Once you have added up all your gross business income, and you've dug up all your deductible business expenses for the year, you can calculate your net business income by subtracting your expenses from your income. Hopefully, you still have some income left over after expenses are deducted! This amount is your net profit for tax purposes.

Self-employment taxes - for sole proprietors, your net business income is the amount on which you must pay self-employment taxes. If your business is a partnership, LLC, or corporation, you must follow somewhat different rules.

Net operating losses - In some years you may find that your expenses exceed your gross business income, which means that you have a loss for the year. You may be able to deduct this loss against any other income you or your spouse may have, or carried over to other years in which you have more income, provided you meet certain requirements.