effective tax rate

effective tax rate definition - finance
The income tax rate that is actually paid by a taxpayer. To calculate it, divide the amount of tax paid by taxable income for the year. The percentage is the effective tax rate. Although a person may be in a 31 percent tax bracket, by the time deductions and credits are taken, the personÂ’s effective tax rate may be less than 31 percent.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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