What Is an Effective Tax Rate?
Your effective tax rate is the percentage of your overall taxable income that you actually pay in taxes. “Effective” is a tax way of saying “average,” and this rate is usually considerably less than your marginal tax rate, which is hinged to your tax bracket.
You’d be in the 22% tax bracket if you earn $60,000 in 2020 and you’re single, but you won't pay 22% of your total income in taxes. You’ll pay 22% on just your top dollars—the portion over $40,125 as of the 2020 tax year.
Original Article Source Credits: The Balance , https://www.thebalance.com/
Article Written By: Beverly Bird
Original Article Posted on: July 04, 2020
Link to Original Article: https://www.thebalance.com/how-to-calculate-your-effective-tax-rate-4685263