Effective Tax Rate
What is Effective Tax Rate?
The share of your total income that you actually pay in tax.
Understanding Effective Tax Rate
Your effective rate equals total tax divided by income. Because of brackets, deductions, and credits, it is lower than your marginal rate.
It is the better measure of your overall tax burden.
Formula
Example
Paying $9,000 of tax on $75,000 of income is an effective rate of 12%.