Tax Rate

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.

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