Average Tax Rate
Definition
Total tax paid divided by total income. Distinct from the marginal rate that applies to the next dollar earned.
Example
$20,000 in tax on $100,000 of income = a 20% average tax rate, even if your top bracket is 32%.
Total tax paid divided by total income. Distinct from the marginal rate that applies to the next dollar earned.
$20,000 in tax on $100,000 of income = a 20% average tax rate, even if your top bracket is 32%.