Effective tax rate

michaeld_umd
Topic Author

11 Apr 2019 09:20 #6747 by michaeld_umd

Effective tax rate was created by michaeld_umd

I am curious how the effective tax rate can be calculated. I know the federal tax rate and state tax rate, and imagine the effective tax rate is in some way related to these. Is it a simple sum? Or is there a formula to calculate the effective value?

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Paul Gilman

12 Apr 2019 09:21 #6748 by Paul Gilman

Replied by Paul Gilman on topic Effective tax rate

Dear Michael,

The equation for the effective tax rate is:

Effective Tax Rate = [ Federal Tax Rate ÷ 100 × ( 1 - State Tax Rate ÷ 100 ) + State Tax Rate ÷ 100 ] × 100

Best regards,
Paul.

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