Effective Corporate Tax Rate Calculator
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What is an effective corporate tax rate and how is it calculated?
The effective corporate tax rate is the actual percentage of taxes a company pays on its earnings. It's calculated by dividing total income tax paid by earnings before tax (EBT), then multiplying by 100 to get the percentage
What's the difference between effective tax rate and statutory tax rate?
The statutory tax rate is the official percentage set by law (currently 21% federal in the US), while the effective tax rate is what companies actually pay after deductions, credits, and other factors. Effective rates are usually lower than statutory rates.
Why would a company's effective tax rate be different from 21%?
Companies can have lower effective rates due to tax credits, deductions, accelerated depreciation, foreign income taxed at different rates, research & development incentives, and other legal tax strategies that reduce their actual tax burden.
What is considered a good effective corporate tax rate?
Effective tax rates vary by industry and company size, but typically range from 15-25%. Large corporations often achieve rates below 15% through tax optimization strategies, while smaller companies may pay closer to the statutory rate.
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