What is a 'Tax Rate'

A tax rate is the percentage at which an individual or corporation is taxed. The tax rate is the tax imposed by the federal government and some states based on an individual's taxable income or a corporation's earnings. The United States uses a progressive tax rate system, where the percentage of tax increases as taxable income.

BREAKING DOWN 'Tax Rate'

A tax rate is the percentage of an individual's taxable income or a corporation's earning that is owed to the state, federal and in some cases, municipal governments. In certain municipalities, regional income taxes are also imposed, increasing the tax burden for those residents.

The dollar threshold for each tax rate is dependent upon the status of the filer (such as single, married filing separately, married filing jointly and head of household).

The term tax rate can also refer to other occasions where taxes are imposed. Examples include sales tax on goods and services, real property tax, short-term capital gains tax rate and long-term capital gains tax rate.

RELATED TERMS
  1. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  2. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  3. Tax Base

    The assessed value of a set of assets, investments or income ...
  4. Taxes

    An involuntary fee levied on corporations or individuals that ...
  5. Progressive Tax

    A tax that takes a larger percentage from the income of high-income ...
  6. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
Related Articles
  1. Taxes

    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 ...
  2. Taxes

    Explaining Progressive Tax

    A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases.
  3. Taxes

    Understanding Taxes

    Taxes are mandatory fees that individuals and corporations must pay to their governments.
  4. Managing Wealth

    What is the Effective Tax Rate?

    The effective tax rate is the average rate at which an individual or corporation is taxed per year.
  5. Taxes

    How Tax Cuts Stimulate the Economy

    Learn the logic behind the belief that reducing government income benefits everyone.
  6. Taxes

    Which Countries Have the Highest Taxes on High Incomes?

    These countries charge the highest taxes on high incomes.
  7. Taxes

    The History Of Taxes In The U.S.

    The number of taxes that we now consider a given did not always exist. Find out how they arose.
  8. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  9. Financial Advisor

    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.
  10. Taxes

    Comparing Regressive, Proportional and Progressive Taxes

    Learn about the basic differences between three common tax systems.
RELATED FAQS
  1. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  2. 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 high-income earners ... Read Answer >>
  3. 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 >>
  4. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
  5. Who first came up with the idea of a progressive tax?

    Learn how the progressive income tax system developed in the United States and became the federal government's primary revenue ... Read Answer >>
Hot Definitions
  1. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  2. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  3. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  4. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  5. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  6. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
Trading Center