City recorded a £51.6million loss last season, down from £97.9million in 2012 and £197.5million the previous season. Turnover was a record high of £271million, up from £231million, and is the second-highest in the Premier League.
City have also paid off all of their debts, which totalled £58million a year ago.
The club's chief executive Ferran Soriano said significant strides had been taken in cutting losses and boosting turnover.
He said: "Growing revenues and controlled expenses are bringing the club to break-even in the immediate future and profitability thereafter."
City will have extra income to look forward to this season from new commercial contracts, around £25million extra from the new Premier League TV deals, and more cash from the Champions League having qualified for the knock-out stages for the first time.
In terms of UEFA's financial fair play rules (FFP), club insiders believe that once the money spent on facilities and youth development are taken into account they will be within the 45million euro limit (£37million) of losses allowed by Europe's governing body.
In the club's annual report, City chairman Khaldoon Al Mubarak said there was a "renewed sense of confidence for the future", with success on and off the pitch had generated "significant commercial opportunities for the organisation and underpinned a strong momentum for the years ahead."