Net Proceeds

What Are Net Proceeds?

Net proceeds are the amount a seller actually receives from the sale of an asset after subtracting all selling-related costs and expenses from the gross sale price. These deductions can include commissions, closing costs, legal fees, taxes, advertising, outstanding liens, and any other costs required to complete the transaction.

Key Takeaways

• Net proceeds = gross sale price − all selling costs and expenses.
• Common deductions: commissions, closing costs, legal/appraisal fees, advertising, taxes, mortgage payoff, and liens.
• Capital gains are calculated from net proceeds (after selling costs) minus the asset’s adjusted basis.
• Accurately estimating net proceeds prevents surprises and aids tax and financial planning.

How to Calculate Net Proceeds

Basic formula:
Net proceeds = Gross sale price − Total selling costs

Typical items to include when calculating total selling costs:
* Brokerage or agent commissions
* Closing fees and escrow costs
* Transfer or excise taxes
* Legal, appraisal, and inspection fees
* Advertising and marketing costs
* Technology or platform fees
* Outstanding mortgage balances or liens that must be paid at closing

If the result is negative (net proceeds < 0), the seller will need to pay the shortfall at closing or obtain lender approval for a short sale.

Net Proceeds and Capital Gains Taxes

For tax purposes, capital gain or loss is generally computed as:
Capital gain/loss = Net proceeds − Adjusted basis

Adjusted basis typically equals the purchase price plus capitalizable costs (commissions, certain improvements). For inherited assets, the basis is commonly the fair market value on the date of death.

Example (stocks):
* Purchase: $6,000 + $24 commission = basis $6,024
* Sale: $8,000 − $32 commission = net proceeds $7,968
* Capital gain = $7,968 − $6,024 = $1,944

Real-Life Example: Home Sale

Seller lists a house for $100,000. Selling costs:
* Real estate agent fee: $5,000
* Advertising: $1,000
* Closing costs: $6,000
Total selling costs = $12,000

Net proceeds = $100,000 − $12,000 = $88,000

Practical Tips

• Itemize and estimate all selling costs early to set realistic price expectations.
• Include mortgage payoff and lien amounts when calculating net proceeds from property sales.
• Keep receipts and records of transaction costs — they affect both net proceeds and tax calculations.
• Consult a tax professional or real estate attorney for complex transactions (e.g., inherited property, significant improvements, or international tax issues).

Bottom Line

Net proceeds show the true amount a seller keeps after all transactional costs are paid. Because selling costs affect both take-home cash and taxable gains, accurately calculating net proceeds is essential for sound financial planning and avoiding unexpected liabilities at closing.