I am trying to grasp how the blended tax rate is determined. It appears that my blended tax rate is 24.6%, whereas my tax bracket for Married Filing Jointly is 37%. Why is there this difference?
Additionally, after applying the blended tax rate to my total taxable income, it seems that I owe the IRS money. How can I verify that my blended rate has been correctly calculated (I am using TurboTax, if that helps)?
hallo, keith ,the blended tax rate, also referred to as the effective tax rate, represents the average percentage of taxes paid after accounting for all sources of income and deductions. This contrasts with the marginal tax rate, which applies to the last dollar of income within a particular tax bracket.
Your 37% bracket applies to a portion of your income, not all of it. The blended rate (24.6%) is the average you pay on everything. TurboTax should be calculating it correctly, but you can check for a tax breakdown by bracket within the software. The IRS website also has tools to estimate your blended rate. If unsure, consult a tax pro!