Mindset, Grit & Failure
What is the difference between a tax bracket and an effective tax rate?
Answered independently in 4 episodes. Every line below is verbatim from the transcript, timestamped to the moment it was said.
The short answer
What the archive says
01Understand the difference between your marginal bracket (highest is 37.5% and graduated) and your effective tax rate after write-offs, which can range from zero to 35%. source →
02Know the difference between your bracket and your effective rate: there are seven brackets topping out at 37.5%, but nobody pays that overall because brackets are graduated and strategies like real estate depreciation or oil and gas deductions cut the effective rate. source →
03Nobody pays the top 37.5% rate on all income because brackets are graduated; focus on your effective tax rate after write-offs, not your bracket. source →
In their words
What was actually said
So when we have brackets, that's our bracket on the next dollar after a certain limit. So once everybody kind of gets that, that this is a graduated bracket, that's point number one. So then what we want to look at is, what is your effective tax rate?
It could be 35% now It is generally true the more money you make the more tax rate you're gonna pay a larger percentage of your income in taxes But then we've got strategies and tools for example Why Trump was such an anomaly and he really wasn't it's just the Wall Street Journal wanted to point this out is that he is a real estate Professional I've got his tax return here on my laptop.
The episodes
4 episodes answer this
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