- Find the following information from your most recent tax returns:
- Your taxable income after adjustments and deductions.
- Your total income tax paid (including federal, state, and local income taxes), after credits but before payments or withholding.
- Divide your total local, state, and federal income tax by your taxable income. The result is your effective tax rate (The percentage of your total taxable income that you pay in income tax. Your effective rate is is less than the rate in your tax bracket, or your marginal rate. ) .
For example, suppose you have taxable income of $50,000, federal income tax of $7,000, state income tax of $500, and no local income tax. $7,500 ($7,000 plus $500) divided by $50,000 equals 0.15, or 15%.
About tax rate calculations in the Lifetime Planner
About the income tax rate that Money uses