Effective tax rates

Effective tax rate is the percentage of your total income that you pay in taxes. It is calculated by dividing your total tax liability by your total income, giving a clear measure of your overall tax burden. For example, if you earn $50,000 and pay $5,000 in taxes, your effective tax rate is 10%. Unlike marginal tax rates, which apply to specific portions of income, the effective rate reflects the true proportion of your earnings that goes to taxes, offering insight into how much of your income is retained after taxes.