Effective tax rate

jIM_Ohio · #1 (**permalink**) 02-12-2008, 05:57 AM

My effective tax rate for 2007 (according to turbo tax) was 8%.

Gross Income was 103k, AGI was 65k, effective tax rate was 8%.

Curious if others are paying a similar effective tax rate?

parafly · #2 (**permalink**) 02-12-2008, 06:46 AM

My effective tax rate was 14%.

I can't wait until I own a home so I no longer need to take the standard deduction...

Beccagold · #3 (**permalink**) 02-12-2008, 06:59 AM

I'm jealous! Ours is 19%

And I owe. I'm really enjoying this tax season.

sweeps · #4 (**permalink**) 02-12-2008, 07:38 AM

6.5% for federal.

KellyB · #5 (**permalink**) 02-12-2008, 08:44 AM

How is "effective" tax rate calculated?

Broken Arrow · #6 (**permalink**) 02-12-2008, 09:24 AM

Nice Jim! For 103k, 8% is darn impressive!

FWIW, mine is 7.8%, but I don't make big bucks like you guys. I really do have to be more tax efficient! (But then, I also file single, and I assume many are "married, filing jointly".)

Quote:

How is "effective" tax rate calculated?

Unless I'm mistaken, that's the percentage you get when you divide how much you actually paid in taxes (after deductions and all that) by your gross income. (At least, that's how I understand it. I'll wait until MonkeyMama shows up to chew me out on the details.

)

sweeps · #7 (**permalink**) 02-12-2008, 09:38 AM

Yes, it's your actual tax paid divided by net taxable income. Turbotax conveniently reports this on page 1 of your report. I would go beyond this even and say it should be actual tax paid divided by gross income, because contributing to a 401k, for example, lowers your net taxable income before it hits your W-2.

Jim and I appear to be in pretty much the same boat. But note that having a low effective tax rate is not necessarily a good thing. In my case I paid a lot in mortgage interest and property taxes. This lowered my effective tax rate substantially, but clearly I'd rather not be paying for these things in the first place.

jIM_Ohio · #8 (**permalink**) 02-12-2008, 09:50 AM

It gets better. Our return this year was 3k federal (owed Ohio $200) and my return next year will be 9k (twins coming in June). We can increase take home pay by $600/month and still not owe.

The 103 gross income is taxed at 25% rates coming out of my paycheck. My itemized deductions took me into the 15% tax bracket ($63300 AGI). Next year we will be even lower in AGI because of the twins, so we are staying in 15% bracket for 2008, I think.

And as sweeps pointed out, using 401k really lowered the tax base. We contributed 12k (including match) to our 401ks last year.

Snave · #9 (**permalink**) 02-12-2008, 11:05 AM

We were at 18%, but I can't complain. I had a severance package in January when I lost my job and took a new job right away in a different state. The positive was that my pay from my previous employer and new employer overlapped for a week and then I got the severance. So, I didn't have to dip in to the severance at all. So, that was a few thousand that went straight in the bank. Also, we didn't have much in the way of mortgage interest this year b/c we sold our house and built another one when we moved. But again, I can't complain. We got back closer to family, I love my new job and I actually made a few thousand dollars on the whole deal.

tripods68 · #10 (**permalink**) 02-12-2008, 08:50 PM

Just did our taxes today our AGI @ $122K
14.9% Effective Tax Rate.

We can't complain at least we got some money back

humandraydel · #11 (**permalink**) 02-13-2008, 04:35 AM

Ugh. 16.7%

InDebtInDC · #12 (**permalink**) 02-13-2008, 04:51 AM

5% state and 17% federal, not counting SS or Medicare.

texastek76 · #13 (**permalink**) 02-13-2008, 06:21 AM

Went from 11% to 14.9% this year. A jump in income wiped out all child credits. Our marginal bracket went from 25% last year to 28% this year.

MonkeyMama · #14 (**permalink**) 02-13-2008, 08:52 AM

Mine was around 4%. I was going to say that is pretty good before the kids.

Of course last few years have been much lower for us (when we first had our kids).

Slug · #15 (**permalink**) 02-20-2008, 08:38 AM

Mine was 6.79% according to TurboTax. I guess that's pretty good based on what I've read. I think was a little over 9 for the year before. I take as many exemptions as I can possibly justify and still the government is holding $3200 of my money interest free. Ugh.

Joan.of.the.Arch · #16 (**permalink**) 02-20-2008, 08:54 AM

7.77%

sweeps · #17 (**permalink**) 02-20-2008, 09:23 AM

... and people complain about high taxes.

DebbieL · #18 (**permalink**) 02-20-2008, 10:02 AM

They are higher in Canada. With a $100k income you would be paying up the wazoo!

Thrif-t · #19 (**permalink**) 02-20-2008, 10:19 AM

I got you all beat 3.61% w/74k AGI

Of course 10k of that agi is from a small inheritance I got and took taxes out of so I wouldn't end up owing. ....so we usually make less.

Oh we have 3 kids too.

Slug · #20 (**permalink**) 02-20-2008, 11:03 AM

Very impressive indeed Thrif-t.