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Marginal vs Effective Tax Rate
Glossary · Tax Concepts
Definition
The marginal rate is the tax on your next dollar of income (your current bracket). The effective rate is total tax divided by total income, always lower because earlier dollars were taxed in lower brackets.
Someone in the 24% bracket might have a 16% effective rate because the first dollars were taxed at 10% and 12%.
Terms are defined in the context of how ArthaPilot uses them. For authoritative definitions, consult the SEC, IRS, or a qualified financial advisor.