Effective Rate

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Effective Rate

Another name for annual percentage rate that refers to the amount of yearly interest to be charged by a lender on the money borrowed by a debtor.

In federal Income Tax law, the actual tax rate that an individual taxpayer pays based upon his or her taxable income.

Federal income tax laws increase the rate of taxation as a taxpayer reaches certain marginal income levels. For example, taxpayers might pay a tax rate of 20 percent on the first $10,000 of taxable income. Thereafter, any increase in income up to an additional $5,000 might be taxable at a rate of 22 percent on that $5,000. The effective rate of tax is computed by dividing the total amount of tax paid by the total of the person's taxable income, adding the tax paid on the person's first $10,000 at a 20 percent rate to the tax paid on the next $5,000 that is at a 22 percent rate. The effective rate is not an average of the tax rates imposed since the average does not take into account the differences in the marginal income levels. A taxpayer's effective tax rate is, however, more than the person's bottom marginal rate but less than his or her top marginal rate.

References in periodicals archive ?
To our knowledge, however, no studies have examined which states, by political party control, decided to establish an effective rate review program and create an anticipated loss ratio requirement that is consistent with the federal retrospective medical loss ratio requirement.
On our estimates, all regions operating under RAB (with a few exceptions) have seen much lower effective rates of return than the statutory rate of return provided by the regulator.
Apart from a premium for interest rate risk, implied fed funds futures yields should reflect expectations of the effective rate for the delivery month.
A reduction in the effective rate of corporate taxes, or the rate of taxes actually paid by companies, is a focal point in government studies on the proposal.
Because use of a base amount is not required, the effective rate of credit in South Carolina may be higher than that of other states having the same statutory rate.
As for corporate tax, most council members see the need to cut its effective rate, currently at 40.
Even former FCC staffers who were in charge of cable policy in the glory regulation days of the "17 percent rollback" now openly concede that the industry - and its complicated video programming product - was much too elusive a target for effective rate controls.
The DRD therefore, allows a corporation's dividend income to be taxed at an effective rate of only 10.
Under that system, the effective rate for those making $5,000 would be 2.
Although they're tempting, fees and the effective rate of interest (up to 97% on an annual basis) far outweigh the amount you receive.
The amended credit facility has a maturity date of 15 August 2014 and an interest rate on all borrowings of the bank's prime rate plus 1%, which is a current effective rate of 4.
The new lower overall effective rate may make it more beneficial to carry back an NOL.
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