What is the 'Effective Tax Rate'
The effective tax rate is the average rate at which an individual or corporation is taxed. The effective tax rate for individuals is the average rate at which their earned income is taxed. The effective tax rate for a corporation is the average rate at which its pretax profits are taxed. An individual's effective tax rate is calculated by dividing total tax expense (line 63 on your 1040 Form) by taxable income (line 22). For corporations, the effective tax rate is computed by dividing total tax expenses by the firm's earnings before taxes. The effective tax rate is the net rate a taxpayer pays if all forms of taxes are included and divided by taxable income.
BREAKING DOWN 'Effective Tax Rate'
The effective tax rate is often a more accurate representation of a taxpayer's tax liability than its marginal tax rate. Two companies that are in the same marginal tax bracket, for example, may end up with different effective tax rates depending on their earnings. This occurs particularly with a progressive, or tiered, tax system, where different levels of income are taxed at different rates. For example, the first $100,000 of income may be taxed at 10%, and income between $100,001 and $500,000 might be taxed at a rate of 15%. The corporation's income is taxed at the various levels, and to determine the effective (or average) tax rate, the total tax is divided by the total taxable income.

Tax Rate
The percentage at which an individual or corporation is taxed. ... 
Marginal Tax Rate
The amount of tax paid on an additional dollar of income. The ... 
Direct Tax
A tax that is paid directly by an individual or organization ... 
Net Of Tax
An accounting figure that has been adjusted for the effects of ... 
Tax Bracket
The rate at which an individual is taxed. Tax brackets are set ... 
Tax Break
A tax break is a savings on a taxpayer's liability. A tax break ...

Taxes
What is the Effective Tax Rate?
The effective tax rate is the average rate at which an individual or corporation is taxed per year. 
Personal Finance
What's a Marginal Tax Rate?
The marginal tax rate is based on a progressive tax system, where tax rates for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon ... 
Taxes
Explaining Progressive Tax
A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases. 
Taxes
How Getting A Raise Affects Your Taxes
Many people think they may actually make less overall because they are paying more taxes. 
Economics
Calculating Net of Tax
Net of tax is a figure that has been adjusted for taxes. 
Taxes
3 Federal Income Tax Facts You Didn't Know
Learn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web. 
Economics
Explaining Corporate Tax
A corporate tax is a tax levied on the profits a corporation generates. 
Taxes
Use Tax Vs. Internet Sales Tax: How Are They Different?
Learn about the differences between a use tax and an Internet sales tax. Find out about transactions in which the taxes apply, and to whom they apply. 
Taxes
5 Most Taxing Taxes for Americans
There’s not much that unites Americans like their hatred of taxes. Here's a list of taxes we dislike the most. 
Personal Finance
3 Ways To Avoid The Dividend Tax Hike
Find out how you can offset the potential tax hikes.

How does the effective tax rate for an individual differ from that of a corporation?
Read about the effective tax rate for individuals when compared with the effective tax rate for corporations, including how ... Read Answer >> 
How are effective tax rates calculated from income statements?
Learn how to read an income statement and how to find the information necessary to calculate a company's effective income ... Read Answer >> 
What is the income breakdown for the effective tax rate?
Read about the effective tax rate, how the marginal income tax brackets affect it and how the denominator in its formula ... Read Answer >> 
Is progressive tax the same thing as marginal tax rate?
Learn how a marginal tax rate is a form of a progressive tax rate. Learn the pros and cons of such a tax policy and who may ... Read Answer >> 
Is the marginal tax rate a progressive tax?
Learn how the marginal tax rate is a progressive tax that takes a higher percentage of income tax from highincome earners ... Read Answer >> 
How can I lower my effective tax rate without lowering my income?
Discover how to reduce your effective tax rate without losing income by maximizing adjustments and deductions, earning taxfree ... Read Answer >>