What Is an Effective Tax Rate?
Your effective tax rate is the actual percentage of your total income that you pay in tax — total tax divided by gross income. It is almost always lower than your marginal (top-bracket) rate because the US system is progressive: your first dollars are taxed at 10%, and only the income above each threshold is taxed at higher rates. A single filer earning $85,000 might sit in the 22% marginal bracket but pay an effective federal rate closer to 12%.
Effective vs Marginal — Why the Gap Matters
Confusing the two is the most common tax mistake. Your marginal rate answers "what will my next $1,000 be taxed at?" — key for deciding on overtime, a bonus, or a pre-tax contribution. Your effective rateanswers "what share of everything I earned went to tax?" — the honest number for budgeting. Never turn down a raise fearing a bracket; only the portion above the threshold is taxed higher.
How to Use This Calculator
Enter your gross income and filing status, choose whether to include FICA payroll tax (yes for W-2 employees), and optionally add your state income tax. The result shows your effective rate across all included taxes alongside your federal marginal rate. Compare it with the detailed Federal Income Tax Calculator for a full bracket breakdown.
Your Real Tax Burden Is Bigger Than Federal Alone
Many people quote only their federal effective rate, but FICA adds 7.65% off the top and state taxes can add up to 13%. A middle earner's true all-in effective rate often lands around 25–30%. Knowing it helps you set aside the right amount — especially if you're self-employed and pay both halves of FICA via self-employment tax.