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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
The results of this study showed that the effective rate after 24h thrombolysis was highest when the blood glucose was ranging from 7.0 to 9.0mmol/L and before treatment the efficacy of thrombolysis was moderately poorer when the glucose was too high or too low, and when the blood glucose was less than 6.0mmol/L before thrombolysis, the effective rate after 24h thrombolysis was lowest, only 33.3%.
"With the interim relief in place, San Gabriel and Meralco may now implement their PSA conditioned to an effective rate of P3.7121 per kwh, lower than what was originally sought at P3.7712 per kwh.
The total effective rate of Group A, Group B, and Group C was, 37.5% (3 cases), 73.68% (14 cases), and 90.91% (20 cases) respectively [Table 1].
Publication bias was assessed quantitatively with Begg's test for the outcome of effective rate by using Stata 12.0 software.
Also, the effective rate on the stock of outstanding secured loans, or mortgages, fell by 1bp to 3.06% in August, while the new secured loan rate stayed at 2.57%.
We linked rate review program changes to the Centers for Medicare and Medicaid Services' (CMS) criteria for an effective rate review program.
The effective rate of tax relief on pensions contributions would be 41.66 per cent.
that your effective rate of tax is lower than the average for people in your income bracket.
The loan features an all-in effective rate of 9%, and a term of 24 months.
Provision for income taxes was USD12.7m (39.9% effective rate), down four percent from USD13.2m (38.0 percent effective rate) for the same period last year.
The effective rate will go up from 2.15 percent to 2.40 percent according to Derek Chung Siu-kuen, head of the bank's retail-banking department.
"Business owners should take regular advice to reduce their effective rate of tax.
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