Accurately determining marginal rate

Forum|Forum|6 months ago
January 14, 2026
3 replies
470 views

I don't think the Tax bracket % shown on the Five Year Tax History report is quite correct. It says that it is based on Taxable Income, which includes dollars potentially taxed at a lower rate (e.g., capital gains). It is showing 32%. However, if I subtract $100 from an ordinary income entry, the total tax decreases by $24, indicating the "tax on the last dollar" is 24%, not 32%.

For the purposes on fine-tuning how much of a distribution to convert to Roth and how much to put back into IRA, isn't my calculation the more accurate?

KrisD15

Level 15

The tax rate TurboTax provides is your Effective Tax Rate.

As you stated, Marginal Tax is the rate of your last taxable dollar, but your Effective Rate is more an "average rate" you paid on all your taxable dollars.

The Effective Rate is loosely based on Total Tax divided by Taxable Income, there is no one specific calculation, and certain credits and income are not included. The effective rate gives you a good idea on how much tax is paid on each earned dollar.

HERE is a link to a previous answer.

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ClickAuthor

Level 6

I specifically said on the Five Year Tax History report. On that report, at the bottom, both effective and marginal rates are listed for each year.

RogerD1

Level 6

Yes, you are correct that for calculating additional income tax amounts, you will want to use the marginal rate to get an estimate of the anticipated amount of tax you will owe. The higher tax brackets cover a very wide range as can be seen on the following link - IRS Tax Bracket 2025 . Unless you are making a very large conversion, it's likely that the conversion will fall completely into one of these brackets.. These brackets will get inflation adjusted for 2026, but also keep in mind that the tax code is written in pencil, so tax law changes can also affect the amount of tax on the conversion.

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