Are tax savings based on effective tax rate??

Question

Are tax savings based on effective tax rate or the highest income bracket you're in??

For example, let's say you take a $5,000 business loss and your highest tax bracket is 32%, are the savings based on 32% or reduced for your effective tax rate?? Thanks

Christopher Smith · Answer

Marginal tax rate as the economists would say

Michael Plaks · Answer

Good question, @Patrick J.

The short answer is: your tax bracket, not your effective tax rate.

The long answer would be, well, long, because there are many assumptions built into my short answer.

Are tax savings based on effective tax rate??

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