Effective Tax Rate

tax

Also known as: effective rate, average tax rate

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

Effective rate is the right number for comparing tax burden over time or across countries. A 2026 single filer earning $100,000 might pay ~$17,400 in federal tax (after standard deduction), giving an effective rate of 17.4% even though their marginal rate is 22%. Most "tax-friendly states for retirees" rankings actually use combined effective rate (federal + state + property + sales) rather than marginal. Effective rate is also what a financial planner uses when projecting retirement income tax exposure — your future marginal might be 12% but your effective 8%.

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Related tax terms

Adjusted Gross Income (AGI)

Adjusted Gross Income (AGI) is your total gross income minus specific "above-the-line" deductions like contributions to ...

Modified Adjusted Gross Income (MAGI)

Modified Adjusted Gross Income (MAGI) is your AGI plus certain deductions added back, used to determine eligibility for ...

Standard Deduction

The standard deduction is a fixed dollar amount that reduces your taxable income. For 2026, it's $16,100 single, $32,200...

Marginal Tax Rate

Your marginal tax rate is the rate applied to your last dollar of taxable income — the bracket your highest-earning doll...

Capital Gains

Capital gains are profits from selling investments held more than a moment. Long-term gains (held >1 year) get preferent...

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