Effective Tax Rates: How Much You Really Pay In Taxes

The College Investor Audio Show · Jul 1, 2020 · 8m

If you make $60,000 per year, what do you actually take home? You know it isn’t the full $60,000. But, if you are in the 22% tax bracket, does that mean you’ll pay $13,200 in taxes? That would seem to be the intuitive answer since $60,000 multiplied by 0.22 equals $13,200.

But, in fact, what you will pay in income taxes will probably be much lower than that. To understand why, you need to understand the difference between marginal tax rates and effective tax rates which we will explain in this article.

However, calculating your income tax payments alone doesn't give you a true picture of how…