what is an effective tax rate 
an effective tax rate is the percentage of tax owed on taxable income it is based on the tax brackets that are set and overseen by the irs as explained above the effective tax rate is lower than the marginal tax rate because the latter breaks down your income into different tiers income at the first tier is taxed at a low rate and each tier above it is taxed at a progressively higher rate than the previous level you can determine what your effective tax rate is by dividing your total tax by your taxable income on your federal tax return on form 1040 divide the figure on line 24 your total tax by the figure on line 15 your taxable income and then multiply that figure by 100 to calculate the effective tax rate for a corporation the total tax is divided by earnings before interest 