Image: Calculator © Creatas, JupiterImages Corporation

Effective tax rates have been in the news lately, and that will continue as the presidential election heats up.

To understand what all the fuss is about, you should do a little math with your own taxes. That way, you'll have some benchmarks to understand the discussion.

For the purposes of the election discussion, "effective federal tax rate" means a filer's total federal income tax owed divided by the filer's adjusted gross income, or AGI. You can find those figures on your 2011 tax return and quickly calculate your own effective tax rate.

● On Form 1040, your AGI is on line 37, and you'll find the total tax figure on line 61.

● On Form 1040A, line 21 has your AGI, while your total tax is on line 35

● On Form 1040EZ, your AGI is on line 4, and your total tax on line 10.

Divide the smaller number by the larger one to get your effective rate.

Ready? Then let's recap. Warren Buffett kicked up a storm when he noted that his effective federal tax rate in 2010 was less than his secretary's. (He paid 11% of his AGI in federal taxes that year.) That's because investment income is taxed at a lower rate than wages and salaries. Buffett questioned the fairness of that situation. The controversy led to the Buffett Rule, a proposal by President Barack Obama that would create a minimum 30% tax rate on people making more than $1 million a year.

The rule likely would apply to Republican presidential contender Mitt Romney, whose AGI in 2011 was $20.9 million and whose effective federal tax rate was 15.4%.

Image: Liz Weston

Liz Weston

The rule would not likely apply to his running mate, Paul Ryan (20% effective tax rate on $323,416 AGI), or to Obama (20.5% on $789,674), or to Vice President Joe Biden (23.2% on $379,035). (You can find these figures on the Presidential Tax Returns section of the Tax History Project site.)

If you're like most people, your effective federal tax rate is less than what these guys pay -- maybe a lot less. The average federal tax rate was just over 11% in 2009, according to the Internal Revenue Service, and many people paid a lot less.

Average federal tax rate for taxpayers with positive AGI*
 Minimum incomeAverage federal tax rate
Top 1%$343,92724.01%
Top 5%$154,64320.26%
Top 10%$112,12418.05%
Top 25%$66,19314.68%
Top 50%$32,39612.5%
*All taxpayers with positive AGI in 2009, the latest year for which statistics are available.
Source: IRS

In fact, a good chunk don't pay any federal income taxes: 46% of all filers, according to the Tax Policy Center. Some don't earn very much, while others have their tax obligation offset by credits of various kinds. To find out if you're one of them, you may need to do a little more math. On the 1040, for example, the credits on lines 64 to 67, 70 and 71 all reduce your total federal tax bill. If you claimed any of these, subtract them from your total tax figure to determine what (if anything) you paid in federal income taxes.

Taxpayers in the lowest income bracket often have a negative federal tax rate. This happens when taxpayers get refundable credits, such as the earned income and child tax credits, that exceed their federal tax bill.

These numbers don't tell the whole story, of course. Most people who work have payroll taxes (Social Security and Medicare) deducted from their checks.

So get out your calculator again, and use your W2s from last year to add in any Social Security and Medicare taxes you paid. Add that to your federal tax bill, and compare it to your AGI.

Obama's share of payroll taxes on $394,821 in wages and salary would have been a little over $10,000 in 2011, boosting his total effective federal tax rate to 21.8%. Biden's would be 25.6% and Ryan's 22.1% once payroll taxes are included. Romney's rate would not change, since he reported no wages or salary for 2011.

Unfortunately, I couldn't find a real apples-to-apples comparison for the rest of us. The Congressional Budget Office keeps track of effective tax rates that include both federal income and payroll taxes. But the CBO's definition of income is a lot broader than the AGI figures we've been using so far. In addition to what's counted on your income tax forms, the CBO adds in:

  • Contributions to 401k plans.
  • Employer-paid health insurance premiums.
  • The employer's share of Social Security, Medicare and federal unemployment insurance payroll taxes.
  • The share of corporate income taxes borne by workers.

Also, the CBO includes both employer and employee contributions to Social Security and Medicare taxes when figuring individual tax rates. (Usually, the split is equal: employer and employee both pay 6.2% into Social Security up to a certain wage cap, plus 1.45% into Medicare. Currently, though, the employee portion of the Social Security tax is reduced to 4.2%.)

The CBO's figures show that the average federal tax rate -- households' federal taxes, including income and payroll taxes, divided by their incomes -- was 17.4% in 2009 for all households. The rate ranged from 1% for households with the lowest incomes to 23.2% for households in the top 20%. (The figure was 28.9% for those in the top 1%.) The bottom line was that in 2009, the latest year for which these statistics are available, the CBO calculations found that the vast majority of Americans paid less than 15% of their incomes in federal taxes.

Income bracketAverage before-tax incomeAverage federal income tax rateAverage payroll tax rateAverage effective tax rate (federal and payroll)
Lowest quintile$23,000-9.30%8.30%1.0%
Second quintile$43,400-2.60%7.90%6.80%
Middle quintile$64,3001.30%8.40%11.10%
Fourth quintile$93,8004.6%9.10%15.10%
Highest quintile$223,50013.40%7.20%23.20%
Source: CBO

Your tax rates may be quite different from the average for your income group, of course. For example, if all of your income is from wages and salaries and you take the standard deduction, you'll likely wind up with a higher tax rate than someone who is living off investments and itemizing deductions.

If you're looking for ways to reduce that tax bill, check out MSN's Tax Center. If you want to weigh in on what the nation should do about tax rates, vote in the November election.

Click here to become a fan of MSN Money on Facebook

More from Liz Weston

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.