Question

What is the expected effective tax rate I should pay if we made $550,000 of income?"

Forum|Forum|7 years ago
June 6, 2019
1 reply
0 views

the effective tax rate seems very high

TurboTax Deluxe Windows

Employee

There isn't one set definition of effective tax rate. The most common formula takes total tax paid (after credits have been applied) and divides by total income. So, on a Form 1040 for 2016, line 63 divided by line 22.

However, the TurboTax program uses a slightly different effective tax rate calculation than the more widespread version. It uses adjusted gross income instead of total income (line 37), but does still uses total tax after credits. There are some formulas that exclude credits from this calculation and use tax paid before credits (line 44).

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