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When to use Marginal Taxes v. Effective Tax Rate

An effective tax rate is great to use when comparing two different people, as it is a relative measure (total taxes paid divided by total income reported). With inStream, effective taxes can be used to model quick scenarios using “ballpark” numbers when detailed income information is not known.

Marginal taxes, on the other hand, is not a relative measure, and is a better option to use when comparing two different strategies. With inStream, you can input all your client incomes, allowing you to model the exact marginal tax rate. This would be the ideal way to model detailed plans, providing increased accuracy when all income data is known.

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