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  1. Home ›
  2. Glossary ›
  3. Effective Tax Rate
Tax Term

Effective Tax Rate

In one sentence: Total tax divided by total income — your true average rate.

What it means

Almost always lower than your marginal rate because lower brackets, deductions, and credits all pull it down. This is the number that actually answers 'what % do I pay?'

← Earned Income Tax Credit (EITC) EIN (Employer Identification Number) →

Related terms

  • E-File
  • Earned Income
  • Earned Income Tax Credit (EITC)
  • EIN (Employer Identification Number)
  • Employer-Sponsored Plan
  • Enrolled Agent (EA)

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