When you’re planning for taxes, it’s helpful to know both your marginal tax rate and your effective tax rate. Marginal tax rate is the percentage you pay in taxes on the last dollar you earn, while effective tax rate is the average tax rate you pay overall to the federal government.
The difference between the two may not seem important, but understanding how each one is calculated is vital to understanding our tax system — and your own bill.
Robin Hartill, CFP® | Yahoo Finance