What Is the difference between average tax rate and marginal tax rate?
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really need help, please put it in understandable words hahaha
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Answer:
If you are in say a 25% tax bracket, that does not mean all income is taxed at 25%. Rather, just that portion that is in that bracket. That would be your marginal rate. Total tax / total income would be your average rate. Many mistakenly believe when their income jumps to a higher bracket, that all their income gets taxed at the higher rate. It's not true. Some is taxed at 10%. some at 15%, etc, How'd I do?
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