One of the most significant qualities of the federal income tax is that tax rates vary based on your income level. This is why the federal government assigns tax brackets. Your highest tax bracket, however, is not your tax rate. This is because you are charged other income taxes for the lower tax brackets. To adjust for the different tax brackets, you can calculate the effective tax rate on your income for the year. You can use Microsoft Excel to perform this calculation.
List your net income in the Microsoft Excel spreadsheet. For example, in cell A1, insert your net income of $50,000.
List your taxes paid in the Microsoft Excel spreadsheet. For example, in cell A2, insert your taxes paid of $10,000.
Type the formula "=[taxes paid cell]/[net income cell]" in any cell. This calculates the tax rate you paid for the year. In the example, type "=A2/A1" to find your result of 0.2, or 20 percent.
You can change the amounts in the net income and taxes paid cells and the formula result will change accordingly.
- You can change the amounts in the net income and taxes paid cells and the formula result will change accordingly.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.