What is the formula for effective tax rate?

Effective Tax Rate = Total Federal Income Tax Paid divided by Gross Income, multiplied by 100. Compute taxable income (gross minus deductions), apply each bracket rate to the income that falls within it, sum the bracket taxes, then divide by gross income.

Do I use gross income or taxable income in the denominator?

Use gross income. That gives the most useful number, the percentage of your total earnings that goes to federal tax. Some analysts divide by taxable income, which produces a higher percentage and is a different statistic.

What are the most common mistakes?

Confusing marginal with effective rate, forgetting to subtract the standard deduction before applying brackets, and applying brackets to gross income rather than taxable income.

§ I

Chapter I

Filed under: formula, worked examples, single filer, 2026.

How to Calculate Your Effective Tax Rate, in Long Hand

Five steps and the arithmetic. Three worked examples at $50K, $100K, and $150K (single filer, 2026 brackets, standard deduction).

§ 1

The Formula

Five lines of arithmetic. The middle three lines repeat once per bracket your taxable income reaches.

Definition 1.1

Effective rate = (sum over brackets of bracket-rate × bracket-income) ÷ gross income

Compute taxable income. Gross income minus standard or itemized deductions, minus 401(k)/IRA/HSA contributions.
Walk the brackets. For each bracket the taxable income reaches, multiply the income within it by the bracket rate.
Sum the bracket taxes. That is your federal income tax.
Divide by gross. Federal tax ÷ gross income = effective rate.
(Optional) Add Social Security at 6.2% (capped at $168,600), Medicare at 1.45% (uncapped), and 0.9% additional above $200,000 for the combined federal effective rate.

§ 2Worked Example A, $50,000, single, 2026

The arithmetic

Gross 50,000 − std. ded. 14,600 = 35,400 taxable.
11,925 × 0.10 = 1,192.50
23,475 × 0.12 = 2,817.00
Sum = 4,009.50 federal tax.
4,009.50 ÷ 50,000 = 8.0% effective.

Reading the result

Marginal bracket: 12%. Effective rate: 8.0%. The gap is 4.0 points. Because taxable income never crosses the $48,475 threshold, the 22% bracket plays no role at all. FICA at 7.65% adds another $3,825, taking the combined federal rate to roughly 15.7%.

§ 3Worked Example B, $100,000, single, 2026

The arithmetic

Gross 100,000 − std. ded. 14,600 = 85,400 taxable.
11,925 × 0.10 = 1,192.50
36,550 × 0.12 = 4,386.00
36,925 × 0.22 = 8,123.50
Sum = 13,702.00 federal tax.
13,702 ÷ 100,000 = 13.7% effective.

Reading the result

Marginal: 22%. Effective: 13.7%. The gap of 8.3 points is the progressive subsidy. Despite being a "22% bracket earner," only $36,925 of the $100,000 (about 37%) actually hits the 22% rate. Combined with FICA, the effective federal rate is approximately 21.4%.

§ 4Worked Example C, $150,000, single, 2026

The arithmetic

Gross 150,000 − std. ded. 14,600 = 135,400 taxable.
11,925 × 0.10 = 1,192.50
36,550 × 0.12 = 4,386.00
54,875 × 0.22 = 12,072.50
32,050 × 0.24 = 7,692.00
Sum = 25,343.00 federal tax.
25,343 ÷ 150,000 = 16.9% effective.

Reading the result

Four brackets in play. Marginal: 24%. Effective: 16.9%. The $32,050 that crosses into the 24% bracket adds roughly $7,700 of tax, meaningful, but the effective rate still sits more than seven points below the bracket label. Combined with FICA, approximately 24.6%.

§ 5Common Mistakes

Mistake one: applying the marginal rate to all income. "I'm in the 22% bracket so I pay 22% of $100,000 to the IRS." This overstates the bill by roughly $8,300 and is the source of most "I'll lose money on a raise" panic.

Mistake two: forgetting the standard deduction. Brackets apply to taxable income, not gross income. A single filer with $50,000 gross has only $35,400 of taxable income in 2026. Skipping the deduction inflates the bracket walk and the final tax figure by 10 to 20 percent.

Mistake three: dividing by taxable income instead of gross. Both produce real numbers, but they answer different questions. "What share of my paycheck goes to federal tax?" divides by gross. "What rate am I paying on the dollars the IRS counts?" divides by taxable. The second is always larger because the denominator is smaller.