How to calculate your effective tax rate
Find your taxable income and total tax on your Form 1040. Then calculate your effective tax rate using this formula:
Total tax ÷ taxable income × 100 = effective tax rate
For example, suppose a filer has $70,000 in taxable income and $9,000 in total tax:
$9,000 ÷ $70,000 × 100 = 12.9%
The filer’s effective tax rate is about 12.9%, even if their highest marginal tax rate is 22%.
Depending on your return, total tax may include taxes beyond regular income tax, such as self-employment tax. In that case, the result may be better described as your overall federal effective tax rate. Use the same calculation when comparing different tax years, but confirm the applicable line numbers on the Form 1040 for the year you’re filing.
Effective tax rate vs. marginal tax rate
Effective and marginal tax rates measure your federal taxes in different ways. The table below shows how each one works.
| Rate | What it shows | How it’s determined |
|---|---|---|
| Effective tax rate | The average federal tax rate across your taxable income | Total tax divided by taxable income × 100 |
| Marginal tax rate | The rate applied to the next dollar of ordinary taxable income | The tax percentage assigned to the highest tax bracket your income reaches |
The US has a progressive tax system, which means income is taxed in layers. For both the 2025 and 2026 tax years, the federal income tax rates are:
- 10%
- 12%
- 22%
- 24%
- 32%
- 35%
- 37%
The amount of income that falls into each layer differs by tax year and filing status.
Factors that can affect your effective tax rate
Your effective tax rate can change based on several factors, including:
- Pretax workplace retirement contributions may reduce taxable wages.
- Deductible traditional individual retirement account (IRA) or health savings account (HSA) contributions may reduce adjusted gross income.
- The standard deduction or itemized deductions reduce taxable income.
- Tax credits reduce your tax liability directly.
- Long-term capital gains and qualified dividends are generally taxed under a different rate schedule than wages and other ordinary income.
Comparing effective tax rates
There’s no single effective tax rate that’s considered ideal. Your rate depends on your income level, filing status, deductions, credits, and the types of income you receive.
Comparing your effective tax rate from one year to the next can help you understand how changes to your income, deductions, credits, or filing status affected your overall federal tax burden. While your rate may change from year to year, reviewing it over time can provide a clearer picture of how your tax situation has evolved.
