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Do You Know Your Marginal and Effective Tax Rates? (Video)

The US Tax system is a progressive tax system, which means you do not pay a flat tax.

Instead, your income fills up various tax brackets and as your income crosses different thresholds you move to a new tax bracket. This allows you to have two important tax rates: Marginal Tax Rate & Effective Tax Rates

Your marginal tax rate is typically the percentage of taxes you will pay on your next dollar.

Your effective tax rate is the total amount of your taxes paid divided by your GROSS income. You may be surprised at how low your effective tax rate is.

Lucas Casarez is the founder of Power Up Tax Planning Services, but he also is the found and Certified Financial Planner at Level Up Financial Planning in Fort Collins, CO. He also is the host of Techie Personal Finance Bootcamp.