Blended Tax Rate FAQs — Effective Rate, Brackets & Withholding

A blended tax rate is the weighted-average percentage of your taxable income that you actually pay in income tax — your total tax liability divided by your total taxable income. It is the same figure tax software calls your 'effective tax rate,' and it is lower than your marginal bracket for anyone above the first tier.

Yes. 'Blended tax rate' and 'effective tax rate' are two names for the same number: the weighted average of every bracket rate your income passes through. It differs from your marginal rate, which is only the rate on your highest tier of income.

Divide your total tax liability by your total taxable income and multiply by 100. For example, $17,053 of tax on $100,000 of taxable income is a 17.05% blended rate. Our blended tax rate calculator does this across the current IRS brackets automatically.

Your tax bracket is your marginal rate, which only applies to income inside that top tier. The income below it is taxed at every lower rate first. Averaging all those lower rates with the top one produces a blended rate that is always below the marginal figure.

Your marginal rate is the tax on your next or last dollar of income — your top bracket. Your blended (effective) rate is the average across all your income. Use the marginal rate for decisions about raises or overtime, and the blended rate to understand what you actually pay overall.

A bonus is ordinary income taxed at your marginal rate, though employers withhold it at a flat 22% (37% above $1 million) as supplemental wages. That withholding is a prepayment — the bonus ultimately settles into your annual blended rate when you file, so you may owe more or get some back.

By default it covers federal income tax only. You can add state income tax in dollars to compute a combined blended rate. Social Security (6.2%) and Medicare (1.45%) are separate FICA taxes on gross wages and are not part of the standard blended income tax rate.

For a pass-through business, a meaningful blended rate combines federal income tax, state income tax, and self-employment or payroll tax, divided by total business income. Because self-employment tax adds 15.3%, a default LLC's blended rate is typically higher than a W-2 employee's on the same income.