What Is an Effective Tax Rate?
An effective tax rate is the share of income actually paid in tax, calculated as total tax divided by total income. Because progressive systems tax different slices of income at different rates, the effective rate is almost always lower than the marginal (top bracket) rate.
Formula
Effective tax rate = total tax ÷ total income × 100. Some calculations use gross income as the denominator and others use taxable income, so it is worth checking which one is meant.
Example
If total federal income tax is 12,000 on income of 90,000, the effective rate is about 13.3%, even if the marginal rate is 22%.
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Effective vs. Marginal Tax Rate Calculator
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Paycheck Calculator (2026)
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🔗 Related Terms
More Taxes Terms
- Additional Medicare Tax
- Adjusted Gross Income (AGI)
- Alternative Minimum Tax (AMT)
- Capital Gains Tax
- Capital Loss
- Child Tax Credit
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.