Public conceptDeductions and rates
Effective tax rate
The total modeled tax divided by the included gross income.
In one sentence
The effective rate averages the modeled tax across the included gross income.
Model
total modeled tax ÷ included gross income = effective rate
Worked example
$8,000 of modeled tax on $80,000 of included income is a 10% effective rate in this estimator.
What to notice
Follow this mechanism in a related lesson, where the same calculator engine exposes every intermediate value.
Common misconception
The effective rate is an average for the modeled income, not the rate on the next dollar.
See it in motion