Definition
Total tax paid divided by total income. The true average rate, typically lower than your marginal rate.
Related Tax & Accounting terms
AGI (Adjusted Gross Income)
Your total income minus specific deductions (like retirement contributions and s…
Tax Bracket
A range of income taxed at a particular rate. The U.S. uses a progressive system…
Marginal Tax Rate
The tax rate applied to your next dollar of income — your top bracket. Often hig…
Standard Deduction
A fixed deduction from taxable income that taxpayers can take without itemising.…
Itemized Deduction
Listing specific eligible expenses (mortgage interest, charitable gifts, SALT, e…
Tax Credit
A dollar-for-dollar reduction of tax owed (e.g. Child Tax Credit). More valuable…
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Browse 350+ finance, crypto, and fintech terms across 12 categories in the Digital.Finance glossary.