How to Calculate Net Proceeds

You can calculate net proceeds.
Image Credit: megaflopp/iStock/GettyImages

The Federal Reserve reported that American households controlled almost $26 trillion in owner-occupied real estate in 2019. It's impossible to know how much money any homeowner might realize if she were forced to sell a home due to illness, unemployment or some other financial disaster. But with a little work, it is possible to estimate your net proceeds from the sale of any asset using a formula for net proceeds.


What Are Net Proceeds?

Net proceeds are the amount you receive when you sell your stuff, after you deduct all the costs and expenses of making the sale from its gross proceeds. Depending on what you sold, the costs of the sale may equate to a small or large percentage of a sale's gross proceeds.

Video of the Day

Defining Net Proceeds

The actual or final amount that you receive from an asset's sale, after all costs have been deducted from the asset's gross sale price, is the sale's net proceeds. Those costs, which are asset-dependent, may include:


  • Legal or appraisal fees
  • Technology or professional fees
  • Commissions, including brokerage or technology platform-based commissions
  • Marketing costs, including advertising or digital media costs
  • State and federal taxes
  • Regulatory expenses

You should identify all costs required to sell an asset as those costs should be a component in the calculation of the asset's sale price. For instance, when you calculate the net proceeds on the sale of a house, you must deduct the mortgage or other property liens, a commission for your agent and that of the buyer, the excise tax and other closing costs from the home's gross sale price. If the sale of your home will result in negative net proceeds, you'll be expected to provide cash at the time of the home sale's closing to pay off your mortgage.


Capital Gains Taxes

If you receive income when you sell stocks, mutual funds, property or other assets, you report it on a personal or corporate tax return. That tax is paid on an asset's capital gains and not on its selling price.

When you calculate capital gains or losses, the amount you paid to acquire the asset – its basis – must be known. For example, if you pay a $32 commission when you purchases $8,000 in stock, the stock's basis is $8,032. In contrast, if you inherit an asset, its fair market value on the date of the benefactor's death is the asset's basis.


What's more, you must calculate net proceeds when you sell an asset. For instance, if you sell stock for $5,000 and pay a $22 commission, the net proceeds are $4,978. But to report capital gains, you must subtract the basis from the asset's net proceeds: Because $4,978 minus $8,032 equals a negative $3,054, the capital loss is $3,054.

The capital gains tax that you may pay is based on a sale's net proceeds, rather than its gross proceeds. For instance, for 2020 to 2021, long-term capital gains are taxed at 0, 15 or 20 percent.


Calculation of Net Proceeds

The formula for net proceeds is relatively simple. Assume that you're selling a house for $200,000. To sell the house, however, you incurred many costs for a total of $24,000:

  • A $10,000 realty fee
  • A $2,000 advertising fee
  • $12,000 closing costs

To calculate your net proceeds from the sale of the house, you subtract the total costs from the home's sales price: $200,000 minus $24,000, or $176,000, is the net proceeds from the home sale.