What is the formula Turbotax uses to calculate the Effective tax rate shown on the cover sheet?

[flattax2]

I verified the formula pointed out by dmertz  for my last two year's return (line22/line11).  It basically ignored the other taxes on line 23. It seems to me it would make more sense if the effective tax rate is calculated by line24/line11. None of situations in PaulD CPA's post applies to me.

[sissybell]

Thank you!  When I use Turbotax the putative Effective Tax Rate is indeed the Total Tax divided the AGI (not Taxable Income)  Yet even the TurboTax info page (https://turbotax.intuit.com/tax-tips/irs-tax-return/what-are-tax-brackets/L8jeM6XaJ##)  gives the incorrect information saying "Your effective tax rate is the percentage of your income that you owe in taxes. To find it, divide your total tax by your total income."

[Amos88]

I recalculated the Turbo Tax effective rate to be Tax Liability, excluding NIIT, divided by Adjusted Gross Income, not by Taxable Income.  I think you should correct your response to help others know exactly how Turbo Tax calculated it.

[MonikaK1]

Yes, the effective tax rate that appears in the Tax Summary on the first page of the filing instructions is the tax liability before Other Taxes divided by the Adjusted Gross Income. 

If this is something that you would like to see addressed in future enhancements to TurboTax,  we invite you to provide specific feedback:

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[JBinPDX]

That formula (1040 line 22 divided by 11) worked for me.  It excluded my Self Employment tax.

[BillD7]

Thank you for your explanation.  I appreciate that you actually tested instead of just throwing out a 'it should be' response.

[2020clearwater]

My printout states 12.02% Effective Rate: clearly the effective rate displayed is incorrect it had me pay 15%

So what do you trust? Did I overpay???

[CatinaT1]

The Effective Tax rate is your:

• Total income (line 9) 
• Deductions (Line 12) This is Itemized or Standard 
• Taxable Income (Line 9 – Line 12) 
• Blended Tax Rate (Tax Liability [below] / Taxable Income [above]) 
• Tax Liability (Line 16 + Line 23) 
• Taxes Paid (line 25d) 
  Credits (Line 21) 
  Total Tax Paid (Line 21 + Line 25d) 
  Refund/Due (Line 34 or Line 37) 

Effective tax rate doesn't consider SE tax and any penalties.

For more effective information see: 

• TaxCaster tax calculator
• Tax bracket calculator

[baldietax]

@2020clearwater  your actual tax $ is calculated based on schedules, worksheets, tax tables etc.  this 'effective tax rate' is just an informational average calculated a certain way defined by TT, which confusingly may not use the exact numbers shown here depending on your 1040 - see previous posts on how it's defined, and see if your 1040 Line 22 divided by Line 11 gets you 12% result.

[BillD7]

Pay what the TurboTax system calculated.  The "Effective Tax Rate" is really more of a figure of merit, not something you should use to determine what to send to the IRS.  

[adamsfcal]

Thanks.  I had been trying to figure out this calculation for a while.  Your formula worked.  I agree that it’s doesn’t make much sense to do it that way, especially without an explanation from TurboTax as to the formula used and reason for it.