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Effective tax rate

  • michaeld_umd
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11 Apr 2019 15:20 #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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  • pgilman
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12 Apr 2019 15:21 #6748 by pgilman
Replied by pgilman 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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