Effective Tax Rate

If you’re just a regular ol’ person (rather than a corporation), it is the average rate at which your income is going to be taxed. If you’re a business, it’s the average rate your pre-tax profits are going to be taxed at.

So for us average Joes, our effective rate is going to be our total tax expense/our taxable income. But for corporations, it’ll be that same tax expense/the total earnings before taxes.