Effective Tax Rate

Effective

A phenomenon connected with effective tax rate is its negativity, called negative effective tax rate, which occurs when the tax benefits received by an individual or corporation exceed the taxable income. A negative tax rate can happen because of factors such as tax credits, deductions, or incentives. For example, if a corporation has a pre-tax income of $100k and tax benefits of $110k, then the corporation has a negative effective tax rate.