Friday, January 7, 2011

Marginal versus effective tax rates

What is a marginal tax rate? The marginal tax rate is a rate that will apply to any additional income you receive. For example if your marginal rate is 10% the next $100 of income will result in $10 additional tax. The marginal rate goes up as your income goes up within certain limits.

Your effective tax rate is the actual percentage of your total income you pay in taxes.

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