Effective Tax Rate
Your total federal income tax divided by your total income, expressed as a percentage. It represents the average rate at which your income is actually taxed.
Your effective tax rate is calculated by dividing your total tax liability by your total income (or taxable income, depending on the context). It gives you a single percentage that represents the real share of your income going to taxes.
Because the US uses progressive tax brackets, your effective rate is almost always lower than your marginal rate. For example, a single filer earning $80,000 in taxable income in 2025 might have a marginal rate of 22% but an effective rate closer to 15% because a large portion of their income is taxed at the lower 10% and 12% rates.
The effective rate is the most meaningful number when comparing your tax burden year over year or against other taxpayers. It accounts for all brackets, deductions, and credits. When people say they "pay X% in taxes," they usually mean their effective rate.
Related Terms
Marginal Tax Rate
The tax rate applied to your last (highest) dollar of taxable income. It indicates how much tax you would pay on an additional dollar of earnings.
Tax Bracket
A range of income taxed at a specific rate. The US uses a progressive system with seven brackets ranging from 10% to 37% for 2025.
Tax Liability
The total amount of tax you owe for the year before accounting for payments, withholding, and refundable credits. It is the bottom-line tax calculated on your return.