Effective Tax Rate Calculator
Calculate your effective tax rate by comparing total taxes paid to total income. Includes federal, state, and local taxes for a complete picture of your tax burden.
Tax Rate Summary
Tax Breakdown
Rate Comparison
Understanding Effective Tax Rates
Your effective tax rate is the percentage of your total income that goes to taxes. Unlike marginal tax rates (which apply to your next dollar earned), effective rates show your actual tax burden across all income levels.
Effective vs. Marginal Tax Rates
Effective Tax Rate
Total taxes paid ÷ Total income
- Shows actual tax burden
- Always lower than marginal rate
- Includes all taxes (federal, state, local)
- Best measure of tax impact
Marginal Tax Rate
Tax rate on next dollar earned
- Determines tax bracket
- Highest rate you pay
- Important for tax planning
- Can be misleading for total burden
Components of Effective Tax Rate
Federal Income Tax
- Progressive brackets (10%-37%)
- Based on taxable income
- After deductions and credits
- Largest component for most taxpayers
State and Local Taxes
- Vary widely by location
- Income, sales, and property taxes
- Some states have no income tax
- Can add 5-13% to effective rate
Other Tax Components
Payroll Taxes
Social Security (6.2%)
Medicare (1.45%)
Employer portion included
Self-Employment Tax
15.3% total rate
Both SS and Medicare
Half deductible
Other Taxes
Capital gains tax
Alternative minimum tax
Estate and gift taxes
Effective Tax Rates by Income Level
| Income Range | Average Effective Rate | Federal + State |
|---|---|---|
| $0 - $25,000 | 12.1% | Federal: 8.2%, State: 3.9% |
| $25,000 - $50,000 | 16.3% | Federal: 11.5%, State: 4.8% |
| $50,000 - $100,000 | 21.4% | Federal: 15.7%, State: 5.7% |
| $100,000 - $200,000 | 25.1% | Federal: 18.9%, State: 6.2% |
| $200,000+ | 29.8% | Federal: 23.1%, State: 6.7% |
Factors Affecting Effective Tax Rate
Reducing Your Effective Rate
- Deductions: Standard or itemized deductions
- Credits: Child tax credit, earned income credit
- Retirement savings: 401(k), IRA contributions
- Tax-advantaged investments: Municipal bonds
- Business expenses: Home office, mileage
Increasing Your Effective Rate
- High state taxes: California, New York, etc.
- Self-employment: Additional payroll taxes
- Investment income: Capital gains, dividends
- Alternative minimum tax: For high-income earners
- Phase-outs: Credits and deductions reduced
Tax Planning Strategies
Income Shifting
Move income to lower tax years
Use retirement accounts
Tax-loss harvesting
Tax Credits
Maximize available credits
Child and education credits
Energy and home improvement
Location Planning
Consider tax-friendly states
No state income tax states
Local tax considerations
Key Takeaways
- Effective tax rate shows your actual tax burden as a percentage of total income
- Marginal tax rate applies only to additional income and is always higher
- Federal, state, and local taxes all contribute to your effective rate
- Effective rates typically range from 12% to 30% depending on income and location
- Deductions, credits, and retirement savings can significantly reduce your effective rate
- Self-employed individuals face higher effective rates due to payroll taxes
- Tax planning can help optimize your effective tax rate
- Consult a tax professional for personalized tax planning advice