Effective vs Marginal Rate Calculator

About this calculator

Your marginal tax rate is the rate applied to your last dollar of income — the rate of the top bracket your income reaches under a progressive tax system. Your effective (or average) tax rate is the total tax you actually pay divided by your total income, which is always lower than your marginal rate because only the income within each bracket is taxed at that bracket's rate, not your entire income.

This distinction is one of the most commonly misunderstood ideas in personal finance: many people assume moving into a higher bracket means all of their income gets taxed at the new, higher rate, when in fact only the portion above the bracket threshold does — the rest continues to be taxed at the lower rates of the brackets below it. Understanding the gap between the two rates is central to tax planning decisions like whether an extra dollar of income, a bonus, or a Roth conversion is 'worth it' after tax.

This calculator uses a simplified two-bracket model to compute both your effective and marginal tax rate from your income and the bracket thresholds and rates, so you can see the real gap between what you pay on average and what you pay on your next dollar.