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How to calculate Effective tax rate

The Effective tax rate formula, with plain worked examples you can check yourself.

Effective tax rate = T ÷ I × 100

The result is a percentage (%).

Worked examples

T = 3750 · I = 25000Effective tax rate = 15%
T = 7200 · I = 40000Effective tax rate = 18%
T = 7500 · I = 50000Effective tax rate = 15%

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Multiply by 100 to show the answer as a percentage.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Cash & Liquidity.

Related terms

Cash flowLiquidityWorking capitalOverdraft

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