What is the average tax rate?

Average or average tax rate of individuals and companies is the total tax burden evaluated from personal income or wages. The average rate is usually calculated as a percentage using a mathematical formula. In the United States, the Internal Revenue Service (IRS) uses a progressive tax system for citizens' taxation. With increasing income, individuals must pay a higher tax rate for each dollar for a predetermined limit. Any increase in the tax rate indicates an increase in marginal rates paid by individuals. The average individual tax rate can be calculated by adding each marginal tax rate and distributing the total number of marginal rates.

In 2009, the marginal rates were 10%, 15%, 25%, 28%, 33%and 35%. Each rate is evaluated up to a certain amount of the dollar depending on the state of the individual's administration and the overall taxable income. The US taxpayer, as the only individual with a total income of $ 65,000, would have an average tax rate of 16.7%. Here is a calculationRO This average rate: revenue $ 0-8 350 is taxed to 10%; Revenue from 8 351-33 950 USD is taxed to 15%; and revenue from $ 33,951-82 $ 250 are taxed at 25%. The average calculation of the tax rate is therefore 10+15+25/3 or 16.7%.

For individuals who are trying to calculate their tax liability, several variations can be used. Each method takes different information or scenarios for a mathematical calculation. Two changes in the calculation are effective average tax rate or effective marginal rate.

The effective average calculation of rates does not use the total taxable income to determine the average tax rate. This calculation can calculate the effective average tax rate based on how the total income of the individual, ie passive income, traditional wage or 1099 income is obtained.

Effective marginal tax rate is calculated for individuals with social revenues from security or benefits that gradually eliminate,such as pension plans delayed tax or pension accounts. This income is separated from normal income, because it is money that does not precisely represent the current income of the individual through jobs or standard or other standard wages.

Companies can calculate the average tax rate using another method. Most companies pay different taxes, including income tax, real estate tax, wage tax and sales tax or use. The calculation of average tax rates depends on how many of these taxes on business are included in the Company calculation process. The use of individual average tax calculations is usually more useful for companies trying to plan future tax obligations.