Is there a name for: Total Tax divided by AGI ??

[ShastaTax]

I know marginal tax rate and effective/average tax rate......but I have a client who monitors Total Tax - divided by - AGI.

1. Is there a "name" for this?

2. What's the significance of monitoring the result of this calculation?

:scratch_head:

[Bob Hoffman]

I know marginal tax rate and effective/average tax rate......but I have a client who monitors Total Tax - divided by - AGI.

1. Is there a "name" for this?

2. What's the significance of monitoring the result of this calculation?

It isn't marginal tax. Sounds like average tax rate to me.

[jainen]

>>Total Tax - divided by - AGI<<

That's a way to analyze effective tax rate. There's no official definition. Its significance will vary with the taxpayer, so why not ask your client what he is trying to track?

For some people, AGI is a useful way to identify total income. Others may have adjustments or losses or non-taxable dividends or partially taxable pensions that skew AGI. Similarly, total tax includes different elements for different taxpayers, considering things like credits, SE tax but not FICA, and even advance EIC. And of course both figures ignore how payments are structured, which might be important to some taxpayer somewhere.

What exactly is the relationship between AGI and total tax? For some but not all taxpayers AGI affects deductions. For some but not all taxpayers AGI affects AGI(!) What if AGI is reduced by a carryover from a previous year, or increased by a recapture of a previous deduction? Or what if total tax is increased by AMT one year and reduced by AMT credit the next without reference to AGI? How do you compare payroll taxes on Schedule C, an AGI adjustment, with payroll taxes on Schedule H, a total tax adjustment?