Finance Calculators

The ideas these tools share

Marginal rate is not your tax rate

Your marginal rate applies to the next dollar you earn. Your effective rate is total tax divided by total income, and it is always lower, because the earlier brackets were taxed at lower rates. Deciding whether a raise is "worth it" using the marginal rate is the single most common tax error, and it has never once made a raise not worth taking.

A deduction and a credit are not comparable

A deduction reduces the income you are taxed on, so it is worth your marginal rate: a $1,000 deduction in the 22% bracket saves $220. A credit reduces the tax itself, so a $1,000 credit saves $1,000. Credits are worth four to five times more per dollar, which is why the distinction is worth learning once.

Compounding is an exponent, not a multiplier

Doubling the rate does not double the outcome and doubling the time does not either. Both sit inside an exponent, which is why small differences in fees or start date produce outcomes that look disproportionate. It is also why credit card debt behaves the way it does.

Self-employment tax is the surprise

An employee splits the 15.3% payroll tax with their employer and never sees the other half. Self-employed people pay both sides on 92.35% of net earnings, on top of income tax. At moderate incomes it is frequently larger than the income tax bill.

Every return metric answers a different question

CAGR ignores when money went in. IRR accounts for timing. Simple ROI ignores time entirely. Two correct calculators will disagree about the same investment, and the disagreement is information about which question you actually asked.

Which one do you need?

You are self-employed or on 1099 income

Freelancer tax and self-employment tax — they include the 15.3% most people forget until the first quarterly bill.

You want to know your refund before filing

The tax refund estimator, which applies the current brackets to your withholding.

You are choosing between two investments

CAGR to compare them on equal terms, or IRR when money went in and out over time.

You are working out whether you can afford something

The loan payment and budget calculators — start from the payment you can carry, not the price you want.

You are planning for retirement

Investment return for the accumulation phase, Social Security for the claiming decision.

Where these go wrong

• Turning down income because of a bracket

  Moving into a higher bracket only taxes the dollars above the threshold at the higher rate. Nothing you already earned is reclassified, and no raise has ever left someone with less take-home pay through brackets alone.

• Comparing a nominal return to a real cost

  A 7% expected return and 3% inflation is not a 4% real return; it is 3.88%, because the two compound rather than subtract. The gap widens as both numbers grow.

• Forgetting quarterly estimated payments

  Self-employed income has no withholding. The tax is still due through the year, and the underpayment penalty applies even if you settle in full at filing.

• Treating an annual figure as monthly

  Rates are quoted annually and payments are made monthly. Nearly every wrong loan or savings result traces to a rate that was not divided, or a term that was not multiplied, by twelve.

Common questions