# Net Proceeds Explained: Definition, Calculation, and Real-Life Examples

![Net Proceeds](https://www.investopedia.com/thmb/rDuEv4l9CQCtkmXQe-y5J5mW5gk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/final_netproceeds_definition_1102-a4e9255be97a42cfbd0e94f745d70392.png)

*— Investopedia / Sydney Saporito*

## What Are Net Proceeds?

Net proceeds are the amount a seller keeps after subtracting all costs and expenses from the gross proceeds on an [asset's](https://www.investopedia.com/terms/a/asset.asp) sale. These costs can include commissions, advertising fees, closing costs, and taxes, especially in real estate transactions, where such expenses can significantly reduce the final payout. Calculating net proceeds is important for financial planning and for determining [capital gains taxes](https://www.investopedia.com/terms/c/capital_gains_tax.asp), which are based on the net rather than the gross amount.

### Key Takeaways

*   Net proceeds are the seller's earnings from an asset sale after subtracting all related costs and expenses.
*   Costs affecting net proceeds may include legal fees, commissions, taxes, and advertising expenses.
*   Capital gains taxes are calculated from net proceeds, not the gross sale price.
*   In real estate, net proceeds account for agent commissions, closing costs, and outstanding property liens.
*   Properly estimating costs is crucial for determining the right selling price of an asset.

## Deep Dive: Calculating Net Proceeds

Net proceeds are the final amount a seller receives from the sale of an asset after all costs have been taken into consideration. Depending on the asset, the cost can include:

*   Fees, such as legal and appraisals
*   Expertise- or technology-related fees
*   Commissions, such as brokerage or technology platforms commissions
*   Advertising or digital media costs
*   Taxes
*   Regulatory expenses

Knowing all the costs of selling an asset helps set the right price.

One area that commonly impacts net proceeds from a sale is the sale of a house. To calculate net proceeds from a home sale, subtract the mortgage, liens, agent commissions, excise tax, and closing costs from the gross sale price. If net proceeds are negative, the seller must pay the remaining mortgage at closing or get bank approval for a [short sale](https://www.investopedia.com/terms/r/real-estate-short-sale.asp).

## How Net Proceeds Affect Your Capital Gains Taxes

Income from selling stocks, [mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp), or property is reported on your tax return. Taxes are paid on the asset’s capital gains rather than on its selling price.

To calculate capital gains or losses, you need to know the asset's purchase price, or basis. For example, consider an investor who purchases $6,000 in stock and pays a $24 commission. The stock’s basis is $6,024. When an asset is inherited, its basis is the [fair market value](https://www.investopedia.com/terms/f/fairmarketvalue.asp) on the date of the person’s death regardless of the amount paid for the asset.

Net proceeds must be calculated as well. For example, the same investor sells the stock for $8,000 and pays a $32 commission. The net proceeds are $7,968. Subtract the basis from net proceeds. In this example, subtracting $6,024 from $7,968 gives a capital gain of $1,944.

## Real-Life Example: Calculating Net Proceeds in a Home Sale

As mentioned, selling a home is an area where costs are varied that determine the net proceeds of the sale. Let's say Jim is selling his house for $100,000. With the sale comes many costs that first need to be summed to arrive at total costs.

The costs associated with the sale of the house are:

*   Real estate agent fee: $5,000
*   Advertising costs: $1,000
*   Closing costs: $6,000
*   Total Costs: $12,000

To arrive at the net proceeds we would subtract the total costs from the sales cost of the house.

Net Proceeds = $100,000 - $12,000 = $88,000

## The Bottom Line

Net proceeds are the amount a seller keeps after subtracting all costs and expenses, such as commissions, fees, and taxes, from the gross proceeds of a sale. These deductions can make a big difference in what you actually take home, especially in transactions like real estate.

Since capital gains taxes are based on net proceeds rather than the gross amount, knowing the true figure is important for both tax planning and smarter financial decisions. Accurately calculating net proceeds helps sellers plan ahead and avoid surprises when it's time to settle costs or pay taxes.