Has anyone in the community checked their effective tax rate to see if TurboTax is calculating correctly?

[Tony DeGance]

I've checked mine and TurboTax incorrectly reported what it was.

[rjs]

There is no standard definition of "effective tax rate," so there is no "correct" or "incorrect" calculation. Different people have different opinions about what "effective tax rate" means and how to calculate it. The basic idea is that it's your total tax as a percentage of your total income. Divide the tax by the income and multiply by 100 to get the rate as a percentage. But opinions vary as to exactly what to include in total tax and total income.

The effective tax rate does not affect your tax return, the amount of tax, or your refund.

[fanfare]

Divide  Form 1040 Line 24 by Line 15 to get your current tax bracket . Multiply by 100 to get a percentage.

That's effectively the tax on another $100 of income.

@Tony DeGance 

[baldietax]

@fanfare this is confusing to me... new (ordinary) income is taxed at the tax bracket on the tax table, not this average?

[SteamTrain]

Yep.....it's just a general handwaving number

________________

(Line 22 / Line 11) x100  would be what I would use....and what is being used on my 1040 test files.

I wouldn't use line 24 because that has the Self-Employment tax added  (I don't have any test files that included the SE tax).   

And the number TTX uses shouldn't include any penalties/interest that might be added at the end, since that is not a tax.

[fanfare]

@baldietax 

Don't be confused,

You're right.

Mea culpa.