A method and system for compensating for output overhead in trace data is provided by analyzing and compensating for the overhead associated with outputting trace information to a trace buffer or a trace file in the form of trace records. A trace record represents an occurrence of some profiling event of interest. Each trace record contains a starting timestamp representing the time at which the generation of the trace record was commenced and an ending timestamp representing the time at which the generation of the trace record was completed. In order to compute the period of execution time attributable to the application program or system being profiled, a starting timestamp of a trace record is compared with the ending timestamp of a preceding trace record, and the difference between the timestamps is directly related to the execution time of the application program or system being profiled. The time period between the timestamps in a trace record is implicitly disregarded as attributable to overhead in the generation of trace records.