The effective tax rate calculation is wrong on page 1 of my return: 16.53%. If I divide my "Total Tax" by my AGI, I get 22.6%. By my Taxable Income, I get 25.3%. Why?

[crikeymcbikey]

Even if I divide by my Total Income from line 7b of my return (which is obviously wrong but the largest number anywhere in my return), I get 20.4%. (The numerator for all of the above is line 16, Total Tax.)

[MarilynG1]

Don't worry about the Effective Tax Rate. Essentially, effective tax rate is just the average tax rate you pay on all of your income.

Click this link for more info on Effective Tax Rate. 

See the screenshot below for Tax Brackets for 2019.

[crikeymcbikey]

That's not helpful at all. The number that TurboTax is showing is flat out wrong. I know what tax brackets are, and I know what an effective tax rate is. There is no way to come up with their number.

[JulieS · Accepted solution]

TurboTax divides your total tax from line 12b, by your total income, line 7b, to get the effective tax rate.

This figure is just informational, it does not appear on your tax return or affect the amount of tax that you pay. 

[crikeymcbikey]

Ah! There's TurboTax's mistake, then. 7b includes my self-employment income, but 12b does not include my self-employment tax. Thanks!

[BillM223]

I assume that the effective tax rate that TurboTax is giving you is the effective income tax rate. 

Self-employment taxes are not considered income taxes even though they are definitely assessed on your income. To be fair, though, the self-employment taxes are a fixed rate of your net Schedule C income and do not vary with all sorts of deductions and credits, much less having tax brackets.

[Anonymous]

We were able to match the effective tax rate by using line 12-B and dividing that they the AGI and it gave us the exact rate shown on the summary TurboTax provided.  It was not 12b and 7b.  It was calculated using 12b and dividing it by the AGI on 8b.

[Anonymous]

I proved today that the amount of the effective tax rate on the summary was line 12-B divided by the AGI.

[mb92079]

Then what is the point of Turbo Tax "effective tax rate" if its not even close to ones actual "real" tax rate? Confusing and misleading seems.

[jessica-askew]

There needs to be a thumbs down button.