What is "effective tax rate" for an individual filing a tax return?

kevhed72
kevhed72 Posts: 5,066
edited April 2014 in The Clubhouse
Anyone, anyone...
Post edited by kevhed72 on
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  • thsmith
    thsmith Posts: 6,082
    edited April 2014
    Depends on how much you make.

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  • ken brydson
    ken brydson Posts: 8,785
    edited April 2014
    Finished ours yesterday, paying big time....FRAAAK!!!
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  • Moose68Bash
    Moose68Bash Posts: 3,843
    edited April 2014
    "Effective tax rate" has different meanings in different contexts, but it is not "marginal tax rate," which is what the table above seems to focus on.

    I think the meaning of "effective tax rate" in common parlance (versus the various technical definitions the accountants could provide) would be best described as the ratio of the total dollars paid in taxes over gross income.

    The idea is to provide a measure of the percentage of total income -- before deductions and adjustments -- that goes to pay taxes. In some cases, the term may be used to apply only to income taxes; in others, it may be used to capture all state, local and federal taxes, including property taxes, sales taxes, etc.

    But, I'm no accountant or tax lawyer. Perhaps, some real experts can define "effective tax rate" for us.
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  • polkfarmboy
    polkfarmboy Posts: 5,703
    edited April 2014
    I got 30k to pay in according to H&R!!
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  • TNHNDYMAN
    TNHNDYMAN Posts: 2,145
    edited April 2014
    ^ with the money you seem to have to spend on gear, you might want to use an actual accountant rather than the block. Kinda like not paying for insurance when shipping stuff... stuff happens.
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  • nooshinjohn
    nooshinjohn Posts: 25,464
    edited April 2014
    The only tax rate I know is "screwed".
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  • rpf65
    rpf65 Posts: 2,127
    edited April 2014
    Effective tax rate is simple. Take your total income, subtract your deductions, to figure your total taxable income. Then you find out how much you owe in taxes, social security and medicare don't count, but state taxes due, except sales tax. Find the percentage of money owed to taxes, and you have the effective tax rate. Forgot one, property taxes, and various fees to whatever don't count also.

    If you take into account all taxes, fees, and price mark ups to every item you purchase, you'll find that you're paying north of 40% in taxes, but only taxes on income collected by state and federal government counts toward effective rate, because it sounds better.
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  • tonyb
    tonyb Posts: 33,014
    edited April 2014
    polkfarmboy wrote: »
    I got 30k to pay in according to H&R!![/QUOTE

    That's a lesson I learned many moons ago, don't get your taxes done by H&R. Go to a regular tax accountant. You may pay slightly more to have them do your taxes but they will save you 10 times that fee.
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  • tonyb
    tonyb Posts: 33,014
    edited April 2014
    rpf65 wrote: »
    Effective tax rate is simple. Take your total income, subtract your deductions, to figure your total taxable income. Then you find out how much you owe in taxes, social security and medicare don't count, but state taxes due, except sales tax. Find the percentage of money owed to taxes, and you have the effective tax rate. Forgot one, property taxes, and various fees to whatever don't count also.

    If you take into account all taxes, fees, and price mark ups to every item you purchase, you'll find that you're paying north of 40% in taxes, but only taxes on income collected by state and federal government counts toward effective rate, because it sounds better.

    Yep...."sounds better" is another word for manipulated. Take inflation numbers for example. What 2 things are the most inflationary ? Food and gas prices....but those are conveniently left out of inflation numbers. Same with unemployment numbers...pretty much any info coming out of a governments mouth has been white washed, manipulated, twisted to present the narrative they wish to portray.

    Guys,

    Best advice I can give you during tax season is to stop doing them yourself. Stop using Turbo tax, and your brother who knows a guy. Have a professional do them, they will save you tons of dough. That's if you have deductions....if your just filing a simple return with no deductions then you can do those yourself.
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  • Easy Runnin
    Easy Runnin Posts: 501
    edited April 2014
    Adjusted gross income (line 37) divided by total tax (line 61).
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  • nspindel
    nspindel Posts: 5,343
    edited April 2014
    It's a bit overly simplistic to say stop doing them yourself, stop using turbo tax. Some of us simply make W-2 income, and don't have any fancy deductions beyond mortgage interest, state and local taxes, and charitable deductions. I've talked to professionals, they've told me there's nothing (legal...) that they can do for me that Turbo Tax can't. If you own your own business, different story, but there are plenty of us for whom Turbo Tax does a very good job.
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  • sucks2beme
    sucks2beme Posts: 5,606
    edited April 2014
    I'm almost down to ez, no state tax, not enough deductions to claim, so standard deduction.
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  • kevhed72
    kevhed72 Posts: 5,066
    edited April 2014
    Hmmmm.....I have used Turbo Tax the last several years. Previously I used HR Block, but after awhile decided the extra cost associated with HR Block didn't really gain us anything on our returns.
    TurboTax gives you your effective tax rate % on page one of your printed return. I would say we fall into the "middle class" income group, only really have mortgage interests, children, property taxes, and charitable deductions.

    Someone earlier said you'll find you are paying north of 40% effective tax rate, which I find hard to believe, unless you had no taxes taken out of each check the entire year due to not making estimated tax payments, self-employment, etc. I am guessing a bit on some of this, but we are not at 40%.
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  • mhardy6647
    mhardy6647 Posts: 33,994
    edited April 2014
    I think (FWIW) TurboTax is fine as long as one basically has a clue about the tax code and regulations pertaining thereto. Fortunately, Mrs. H does -- she does our taxes, which are fairly complex, and I am deeply grateful.

    We'll see what next year's like, when I'll have some self-employment income and expenses to deal with...
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  • xjghost
    xjghost Posts: 1,105
    edited April 2014
    I pay a CPA firm every year. Sense the divorce and alimony have started I've been seeing green every February or March.
    Alimony is 100% deductible! Can we say silver lining!!?? When I get all my doc's they go asap to be done. I avoid all this now that the x isn't involved.
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