Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
New Member
posted Jun 6, 2019 4:09:00 AM

I have a question about the effective tax rate it has calculated for me. It seems incorrect?

I've entered everything and am ready to file, however in reviewing my return before filing, I see that turbotax has me at a 13.62% effective tax rate. This is significantly less than the effective tax rate I've been at for the past few years when I've had my taxes prepared by a CPA. Can anyone shed some light on this?

0 1 488
1 Replies
Level 7
Jun 6, 2019 4:09:01 AM

There isn't one set definition of effective tax rate.  The most common formula takes total tax paid (after credits have been applied) and divides by total income.  So, on a Form 1040 for 2016, line 63 divided by line 22.  

However, the TurboTax program uses a slightly different effective tax rate calculation than the more widespread version, which is why you probably see a discrepancy from your CPA prepared return. It uses adjusted gross income instead of total income (line 37), but does still use total tax after credits.  There are some formulas that exclude credits from this calculation and use tax paid before credits (line 44).