Marginal Tax Rate vs Effective Tax Rate

Your effective tax rate is not the same as your marginal tax rate.
Let’s say you live in a country where your first $10,000 of income is taxed at 10%, your next $30,000 of income is taxed at 15%, and any income beyond that is taxed at 25%.
If you had $60,000 of taxable income you would owe $10,500 in tax.
That’s an effective tax rate of 17.5%.
But your marginal tax rate, which is the tax rate that would apply if you earned an additional dollar of income, would be 25%.
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[@midaztouch]

No music, no drawn out intro, no begging for likes and subscribes, no beating around the bush. Immediately got right to the point. Thank you!

[@ashtonvoss6567]

Great explanation thanks

[@westirons8874]

Love the shorts 👍 great work

[@Edspira]

Thanks! 😊

[@normconel2907]

Appreciate the no-frills explanation. Cheers

[@Edspira]

No problem 👍

[@Tidasthompson]

Thanks for the vid. It cleared things up! But the last part- "If you have an additional dollar of income ($60,001.00??) your marginal tax would be 25%? I thought it already was 25%? I'm trying to figure out the additional dollar statement meaning.

[@phaldaz]

You're absolutely right, it already was 25%
It's just that marginal ALWAYS means one more 'something', so in this case the marginal tax means the tax on an additional dollar, which in this case is also 25%
So you're absolutely correct!

[@shunkorbek]

Thank you.

[@Edspira]

You're welcome!

[@dr.mariom.d.5333]

This is great thank you 😄

[@jjholmes8530]

Good knowledge for free🙏

[@Kas1122]

I think a lot of tax payers don’t know the marginal tax rate works