What is Your Effective Tax Rate?

[Alan]

TT says 15.6% which is calculated on gross AGI.

Using taxable income (1040 line 43) it is 17%.

 

[ABQ2015]

Fed income tax/AGI 18%
Fed income tax/TI 21%
Fed + state income tax/TI 26%

I'm single, not yet retired, and slightly into the 28% marginal tax bracket by a few thousand. In retirement, the effective tax rate should decrease 2-3% or not that much since income will be pension, 401k, and SS.

 

[youbet]

Using your definition (Line 43/Line 63), mine was 15.6%. Being single with a pension is not so good with respect to fed taxes. At least no state taxes for me.

Actually, it is good. DW and I are impacted big time by the marriage penalty and are paying more taxes filing MFJ than we would as two singles.


Our retirement incomes are similar.

 

[VFK57]

This year it was much lower at 19.5% on Fed Return.

 

[tmm99]

I think we need some standardization as many are doing it differently. My understanding is your effective rate is your tax liability (actual tax due) divided by taxable income (income after standard/itemized deduction and exemptions,etc.) not AGI. To be even more specific Form 1040 line 63 divided by line 43. For the sake of simplicity could we keep it just on the federal returns ?

My Form 1040 line 63 divided by line 43 was 17%. I was employed for the 1st 3 months of 2015.

 

[Dash man]

Haven't done my 2015 tax, I pretty sure we're looking at a 30% + effective tax rate for this past year.last year it was 32% thanks to stock options exercises and this year should be similar. Next year maybe be the same, but after that it'll be mostly dividend income and should be dramatically lower.


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[audreyh1]

Well, Turbotax reports it as 12.28%, but by Frayne's 1040 line 63/line 43, I get 14.47%.

Most of our income is taxed at long-term capital gains rates, and we are in the middle of the 15% tax bracket for ordinary income. So even though we pay AMT on that ordinary income and are subject to NIIT, our overall tax rate is low. Fairly typical of a retiree living off of investments, as long as they aren't withdrawing a large amount out of an IRA.

Frayne's calc kicks out several items that lower my taxable income, such as the HSA contributions, exemptions, and deductions. That doesn't seem right. I would think it more appropriate to use line 22 - total income.

If I divide line 63 (tax owed) by my total taxable income (line 22), I get 13.29%.

If I add back in my tax-exempt income (which doesn't appear on line 22), I get 12.95%, which is a little closer to what Turbotax is reporting, but still off, so I don't know what the heck TT Is doing! Fantasy land!

Well anyway - it dropped 2% compared to last year, which is a good thing!

 

[scrinch]

I like the TT method better. Seems like an "effective tax rate" should be all the tax you pay divided by all your income. You start subtracting out exemptions and deductions from your actual income, and it seems to me it's not really a bottom line "effective" number any more.

 

[Al in Ohio]

The OP expresses the effective tax rate as stated on the Turbotax summary. For non Turbotax users this would basically be your FEDERAL tax only effective rate after all additions, credits and deductions are taken.

Our joint federal filing tax rate puts our combined gross income in the 25% rate level.

Turbotax lists our federal Effective tax rate at 11.09%.




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[prototype]

[FONT=&quot]For 2015...[/FONT]

[FONT=&quot]Fed Marginal Rate 25% (just barely )[/FONT]
[FONT=&quot]State Marginal Rate 5.75%
[/FONT]
[FONT=&quot]Fed AGI / fed income tax = 10.4%
Fed TI / federal income tax = 13%
Fed TI / fed + state = 20% (See note)
[/FONT]
[FONT=&quot]Note: [/FONT][FONT=&quot][FONT=&quot] State TI significantly higher than Fed TI. [/FONT]Significant Dividends from VWIUX on State Taxes this year. Not much of that fund is in muni bonds from my State.
[/FONT]

 

[mrfeh]

Haven't finished 2015 taxes yet, but last year our effective rate was 15 or 16%. I expect it to be about the same this year.

 

[2017ish]

Weird--HR Block's software didn't spit this out on page one like T.Tax (but they were the ones with Amazon rebate this year.)

Answered based on basis of AGI and line 63 (which overstates effective rate for those of us still working, due to retirement plans and employer health insurance).

Going to be nice, on one level, when we retire and don't have to check the "over" box. Then again, it is (on balance) a nice problem to have.

 

[eytonxav]

9.9% per TT, no state to factor in.

 

[jollystomper]

So I get carried away with these calculations...

fed tax/taxable income: 17.8%
fed tax/agi: 12.5%
fed tax/all income (includes non-taxable income and retirement contributions): 11.0%

total income taxes (fed + state) /taxable income: 27.0%
total income taxes / agi: 19.0%
total income taxes / all income: 16.6%

all taxes (fed + state + ss + medicare + property) / taxable income: 37.9%
all taxes/agi: 26.6%
all taxes/all income: 23.4%

 

[lucky2030]

TurboTax says 27%. There are worse problems to have.


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[38Chevy454]

My Federal per TT is 15.15%, which is about 1% higher than last year. Had more deductions last year.

 

[calmloki]

We shifted some income to the gal this year, so she was the high earner and had an effective rate of 23%. I was at 17.74%. Adding our line 63 taxes and dividing by our combined line 43 income we will pay 21.3%. Somebody has to pay for our social security checks!

 

[DrRoy]

11% FIT this year. It's been higher and lower other years.

 

[jkern]

Federal and State effective tax rate on AGI for 2015: 4.5%

 

[shotgunner]

On a gross income of $40,300 I paid 0 income tax and got a refund of $3250. Thank you ACA refundable tax credit

 

[Major Tom]

0% Feds
0% State

There are some advantages to being "poor"

 

[aaronc879]

0% Feds
0% State

There are some advantages to being "poor"

I paid 0% Fed and .25% State but around 15% Self Employment tax.

 

[kgtest]

Mine was 3.22% still working and not retired Things that *helped lower it were being unemployed and having a child...


apparently you have to spend money, to save money according to the current tax system

 

[dtbach]

Mine came to 14.58%. But after spending the time to calculate it, I pondered why I went through the exercise as there is nothing I can do about it now or in the future.

It is what it is. I suppose it was interesting once.

 

[LOL!]

The Line 43/Line 63 number is kinda weird to me for a couple of reasons:

1. There are significant tax credits below line 63 which reduce one's taxes. There are credits at line 55 which also reduce one's taxes, too, so why exclude some credits?

2. There are significant exclusions and deductions above line 43 which lower taxable income, but that income is still quite beneficial.