Mention the ‘Warren Buffet’ rule and you will immediately get an opinion from everyone.
For educational purposes, let me introduce you to two tax rates.
Marginal Tax Rate
The marginal tax rate is the federal income tax rate that will be applied to any additional income that you might receive. For example, if your marginal tax rate is 28%, the next $100 of additional income that you earn will result in $28 of additional tax.
During your tax appointment, ask me for your marginal tax rate! Then ask me the amount of additional income you can make before jumping into the next tax bracket.
Effective Tax Rate
The effective tax rate is the actual percentage of your total income that you pay in federal income tax.
During your tax appointment, ask me for your effective tax rate…it’s typically lower than your marginal tax rate!
When people refer to Warren’s Buffet’s tax rate – they are referring to his effective tax rate! Compare his to yours when we meet during this tax season! |
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