When you print or save your tax returns, TT has a "Federal Tax Return Summary" section on an introductory page with these figures on it:
Adjusted Gross Income
Taxable Income
Total Tax
Total Payments/Credits
Payment Due
and...
Effective Tax Rate
How is "Effective Tax Rate" calculated?
I tried dividing the "Total Tax" by both the "Adjusted Gross Income" and by the "Taxable Income," and neither result matched the "Effective Tax Rate" shown in that section. Both percentages were higher than the "Effective Tax Rate" shown.
To calculate your individual effective tax rate.
You may have looked at the Blended Tax rate.
The Blended tax rate is calculated under Federal / Federal Review
The Blended Tax rate is:
(All line numbers are on form 1040).
The Blended is your
Taxes Paid (line 25d)
Credits (Line 21)
Total Tax Paid (Line 21 + Line 25d)
Refund/Due (Line 34 or Line 37)
Heck...they're all just handwaving numbers.
Use whatever calculation procedure you want, and don't depend on whatever procedure TTX is using.
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For my own purposes, so I know exactly which handwaving value I'm looking at.
1) I tend to use line 22 divided by AGI (line 11)
For those who have Self employment income, if they really want to get annoyed;
2) They can ALSO use line 24 divided by AGI (line 11)
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@JohnB5677 wrote:To calculate your individual effective tax rate.
- Take your total tax on line 24 of Form 1040
- Divided by
- By your taxable income line 15 of form 1040
That's what I did. But it does not match the "Effective Tax Rate" TT shows on the summary page. It differs buy about 2.5%.
My question is how does TT calculate it. Apparently not like this.
It does not say "Blended Tax Rate" and it is not in the section where you described the Blended Tax Rate is found. It was on the simple summary page provided with the return and called "Effective Tax Rate." But it doesn't seem to be correct. It does not equal line 24 divided by line 15 on the 1040.