Effective Tax Rate Calculator
Calculate your effective tax rate for personal income or corporate earnings - understand your true tax burden
Calculate Effective Tax Rate
Total income before deductions
Total federal income tax paid
Standard or itemized deductions
Your tax filing status
Personal Tax Rate Results
Income Breakdown
Tax Rate Analysis
Formula: Effective Tax Rate = Total Tax Paid ÷ Gross Income × 100
Calculation: $12,000 ÷ $75,000 = 16.00%
💡 Your effective rate (16.00%) is lower than your marginal rate (22.00%) because of progressive tax brackets.
Example Calculation
Personal Tax Example
Gross Income: $75,000
Total Tax Paid: $12,000
Deductions: $13,850 (standard deduction)
Taxable Income: $61,150
Calculation
Effective Tax Rate = $12,000 ÷ $75,000 × 100
Effective Tax Rate = 16.00%
Marginal Tax Rate = 22% (based on taxable income)
Take-Home Pay = $63,000
Your effective rate is lower than marginal because earlier income is taxed at lower rates (10%, 12%).
Effective vs Marginal Rate
Effective Tax Rate
Your overall tax rate on all income. Total tax ÷ total income.
Marginal Tax Rate
Tax rate on your last dollar of income. Highest bracket you reach.
Why the difference? Progressive tax brackets mean earlier income is taxed at lower rates, making your effective rate lower than marginal.
Tax Planning Tips
Use your effective rate for real tax burden assessment
Use marginal rate for decision-making (e.g., IRA contributions)
Maximize deductions to lower taxable income
Corporate: Track effective rate trends over time
Compare your rate to industry averages
Understanding Effective Tax Rate
What is Effective Tax Rate?
The effective tax rate is the average rate at which your income or earnings are taxed. It represents the actual percentage of your total income that goes to taxes, providing a more accurate picture of your tax burden than the marginal tax rate.
Personal vs Corporate
- •Personal: Total tax paid ÷ gross income
- •Corporate: Income tax paid ÷ earnings before tax
- •Both measure actual tax burden, not theoretical rates
Calculation Formulas
Personal Tax:
ETR = (Total Tax Paid ÷ Gross Income) × 100
Corporate Tax:
ETR = (Income Tax ÷ EBT) × 100
Why It Matters: Effective tax rate is the best metric for comparing tax burdens across individuals, companies, or time periods because it reflects the actual taxes paid relative to income.
Progressive Tax System Impact
In a progressive tax system like the US, your effective rate is always lower than your marginal rate because:
Initial income is taxed at lower rates (10%, 12%)
Each bracket only applies to income within that range
Standard/itemized deductions reduce taxable income