which is lower the effective tax rate or the marginal tax rate 
an individual s effective tax rate is lower than the marginal rate that s because the marginal tax rate breaks up your income into different levels the first level of income incurs a lower tax rate while higher levels of income are taxed at the highest rate any amounts that fall in between are charged taxes based on levels in between the bottom lineyour effective tax rate is the percentage of tax you owe on your taxable income this is based on brackets set and maintained by the irs you can easily figure out your effective tax rate by dividing the total tax by your taxable income from form 1040 for corporations the effective tax rate is calculated by dividing the total tax by earnings before interest if you re unsure about anything related to your taxes make sure you consult a tax advisor or professional who can guide you in the right direction correction nov 3 2022 a previous version of this article misstated that taxpayers can calculate their effective tax rate by dividing the figure found on line 16 of form 1040 by the figure found on line 11b on form 1040 the correct way to calculate your effective tax rate is by dividing the figure from line 24 or your total tax by the figure from line 15 which is your taxable income then multiplying that figure by 100 