What Is a Marginal Tax Rate?

The marginal tax rate is the amount of tax that applies to each additional dollar of income earned. The higher your income, the higher your marginal tax rate ends up being.

What Is an Effective Tax Rate?

The effective tax rate, also referred to as average tax rate, is the total tax paid divided by taxable income. Average tax rates tell you how much of your income you paid in taxes overall.

Between marginal and effective tax rates, which one is higher?

Marginal tax rates are usually higher than effective tax rates. Your effective tax rate takes into account taxes you’ve paid as well as amounts you deduct. For example, you might have a marginal tax rate of 35% but an effective tax rate of 27%.

How can I lower my effective tax rate?

Claiming more deductions can lower your effective tax rate. For example, if you normally claim the standard deduction, you might consider how you could reduce your taxable income by itemizing things like charitable contributions or interest paid on a mortgage loan.

What does it mean if the effective tax rate is negative?

A negative effective tax rate means that you have no income the IRS can tax or that even after tax was applied, you got money back in the form of a refund. Getting a tax refund isn’t necessarily a bad thing. However, it does mean that you’ve effectively lent the government your money tax-free all year. You can avoid getting a refund by adjusting your tax withholding on your W-4 form.

Medical Records Specialist Salary

SoFi receives compensation in the event you obtain a loan, financial product, or service through SoFi’s marketplace, owned and operated by SoFi Lending Corp., licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. ((www.nmlsconsumeraccess.org)). This page is NOT operated by SoFi Bank. Loans, financial products, and services may not be available in all states.

All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown through SoFi’s marketplace are from the listed providers, are estimates based upon the limited information you provided, and are for informational purposes only. All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider's discretion. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the provider you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are from the listed providers and not by SoFi Lending Corp. Please review each provider's Terms and Conditions for additional details.

†Credit score impact: To check the offers, terms, and/or rates you may qualify for, SoFi and/or its network providers will conduct a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the provider(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. Rates may not be available from all providers.

TLS 1.2 Encrypted

Equal Housing Lender

“Medical Records Specialist Salary”

Marginal vs Effective Tax Rate

Does Getting Married Affect Your Credit Score?

Setting Up a Retirement Account for Your Child

Home Tax Deductions and Tax Breaks for Homeowners

What Are Working Capital Loans?

“Medical Records Specialist Salary”

Marginal vs Effective Tax Rate

Does Getting Married Affect Your Credit Score?

Setting Up a Retirement Account for Your Child

Home Tax Deductions and Tax Breaks for Homeowners

What Are Working Capital Loans?

Student Loan Refinancing

Personal Loans

Online Investments

Other

Student Loan
Refinancing

Personal
Loans

Online
Investments