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janinehumprey
New Member

So I am looking at effective tax rate of -29.30% is that correct

Effective Tax Rate means.
2 Replies
BMcCalpin
Level 13

So I am looking at effective tax rate of -29.30% is that correct

"Effective tax rate" is the rate at which you actually pay tax, i.e., tax due divided by your income. "Marginal tax rate" is the rate at which your next dollar of income will be taxed.

When you see descriptions of tax brackets (10%, 15%, 25%, etc.), these are the marginal tax rates. But this is not the effective tax rate of what someone in the 25% tax bracket actually pays, because you pay a lesser tax rate on income in the lower brackets.

I am not sure what "-29.30%" means. But it is not uncommon for self-employed individuals to pay what seem to be high tax rates, because the self-employed owe two taxes on the Schedule C income: federal income tax and self-employment taxes (think: Social Security and Medicare). Since the self-employment tax rate is 15.3% of your net self-employment income, if you are in the 15% tax bracket, you might be looking at 29-30%.

ltg
Returning Member

So I am looking at effective tax rate of -29.30% is that correct

@TurboTaxBillMc In 2016 Turbotax's Tax History Report said my ETR was -16%. My income to debt ratio was big that year and I was self-employed. @janinehumprey were you in a similar situation?

I actually have a question about how Turbotax calculates this value which can be negative. Here's the
link:

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4462410-what-useful-practical-information-does-the-effective-tax-r...>
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