Marginal vs effective tax rate
Glossary · Tax concepts
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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 fall in lower brackets.
Someone in the 24% bracket might have a 16% effective rate because the first dollars fall in the 10% and 12% brackets.
These definitions describe how ArthaPilot uses each term. For authoritative definitions, consult the SEC, IRS, or a qualified financial advisor.