Pay Raise Calculator

A 5% raise doesn’t mean 5% more in your pocket. Calculate exactly how much your new raise will increase your actual take-home pay after federal, state, and FICA taxes.

Current Pay

The Raise

Tax Settings

Net Take-Home Increase

per

Your Effective Raise is %

While your gross pay increased by {raiseType === ‘percent’ ? `$ %` : formatCurrency(raiseAmount)}, taxes took a bite out of the difference. Your actual take-home pay only increased by %.

Why a 5% Raise Doesn’t Mean 5% More Take-Home Pay

Getting a raise is an exciting milestone, but the first paycheck after a salary bump often leaves employees scratching their heads. If you received a 5% raise, why did your actual bank deposit only go up by 3.5%?

The answer lies in the difference between gross pay (what your employer pays you) and net pay (what you take home after taxes). Because the United States uses a progressive tax system, every additional dollar you earn is taxed at your highest marginal rate.

How Tax Brackets Work With Raises

The “Bracket Creep” Misconception

One of the most common financial myths is the fear of “being pushed into a higher tax bracket.” Many people mistakenly believe that if a raise pushes their income into a new bracket, their entire salary will be taxed at that higher rate, resulting in less take-home pay than before the raise.

This is mathematically impossible under the U.S. tax code.

We use a marginal tax system. Think of tax brackets like buckets. Your first $11,600 fills the 10% bucket. The next chunk of money fills the 12% bucket, and so on. If your raise pushes you into the 22% bucket, only the money inside that specific bucket is taxed at 22%. The rest of your income is still taxed at the lower 10% and 12% rates. You will always take home more money when you get a raise.

Effective vs. Marginal Tax Rate

• Marginal Tax Rate: The tax rate you pay on your last dollar earned. If you are in the 22% bracket, your raise is taxed at 22%.
• Effective Tax Rate: The actual percentage of your total income that you pay in taxes. Because your lower income fills the cheaper buckets, your effective rate is always lower than your marginal rate.

FICA and State Taxes on Raises

Federal income tax isn’t the only thing taking a bite out of your raise.

Social Security and Medicare

FICA taxes are a flat rate for most earners. Social Security takes 6.2% of your raise, and Medicare takes 1.45%. This means an automatic 7.65% of your raise is gone before income taxes even apply.

The Social Security Cap: Social Security tax is capped at a certain wage base (around $168,600 in 2024). If your salary was already above this cap, your raise will not be subject to the 6.2% Social Security tax, meaning high earners actually keep a slightly larger percentage of their raises.

State Income Taxes

If you live in a state with income tax, your raise will be subject to state taxes as well. Some states have flat taxes (e.g., Pennsylvania at 3.07%), meaning your raise is taxed at the exact same rate as your base salary. Other states (like California and New York) have progressive brackets similar to the federal government.

COLA vs. Merit Raises

Not all raises are created equal. It is important to understand the difference between a Cost of Living Adjustment (COLA) and a merit raise.

• Cost of Living Adjustment (COLA): A raise designed purely to keep pace with inflation. If inflation is 3% and you receive a 3% COLA, your purchasing power remains exactly the same. You aren’t actually making “more” money in real terms; you are just treading water.
• Merit Raise: A raise given based on your performance, increased responsibilities, or market value. A true merit raise should exceed the current rate of inflation, genuinely increasing your purchasing power and standard of living.

How to Negotiate a Raise Effectively

If your calculator results show that your take-home pay isn’t increasing as much as you need it to, it might be time to negotiate a larger gross increase.

1. Do Your Market Research: Never ask for a raise based on your personal financial needs (e.g., “My rent went up”). Ask based on your market value. Use tools like Glassdoor, Payscale, and industry salary surveys to find the median pay for your exact role and location.
2. Document Your Performance: Create a “brag document.” List specific, quantifiable achievements from the past year. Did you save the company money? Did you bring in new clients? Did you take on responsibilities outside your job description?
3. Time It Right: Don’t wait for your annual review to ask for a raise; by then, the budget is usually already locked. Start the conversation 2-3 months before your review cycle.
4. Negotiate Benefits: If the company cannot meet your salary number due to budget constraints, negotiate other compensation. Ask for extra PTO days, a flexible work-from-home schedule, a better title, or a professional development stipend.

Frequently Asked Questions

Clear answers on how raises affect your taxes and take-home pay.

Why doesn't a 5% raise mean 5% more take-home pay?

Your raise is applied to your gross pay, but your take-home pay is what's left after taxes. Because the U.S. uses a progressive tax system, your raise is taxed at your highest marginal tax rate. For example, if your effective tax rate on your base salary is 15%, but your marginal tax bracket is 22%, your raise will be taxed at 22% (plus FICA and state taxes). This heavier tax burden on the new money means your net pay percentage increase will always be lower than your gross pay percentage increase.

Can a raise push me into a higher tax bracket, and is that bad?

Yes, a raise can push your income into a higher tax bracket, but no, it is never a bad thing. This is a common misconception. If you cross into a higher bracket, only the specific dollars that fall above the bracket line are taxed at the higher rate. Your previous income is still taxed at the lower rates. You will never lose money or take home less pay simply because a raise pushed you into a new tax bracket.

What is the difference between effective tax rate and marginal tax rate?

Your marginal tax rate is the tax bracket your highest dollar of income falls into (e.g., 22%). It is the rate you pay on your last dollar earned, and the rate your raise will be taxed at. Your effective tax rate is the actual percentage of your total income that you pay in taxes (e.g., 14%). Because your first chunks of income are taxed at 0%, 10%, and 12%, your effective rate is an average of all those buckets, making it much lower than your marginal rate.

How much of my raise will actually reach my take-home pay after taxes?

A good rule of thumb is that you will keep about 60% to 70% of your raise. To calculate it roughly: subtract your marginal federal tax rate (e.g., 22%), your state tax rate (e.g., 5%), and FICA taxes (7.65%). In this example, taxes take 34.65% of the raise, leaving you with 65.35% of the new money in your actual paycheck.

How do I negotiate a raise effectively and what should I ask for?

To negotiate effectively, you must prove your market value. Research what competitors pay for your role using sites like Glassdoor or Payscale. Document your specific achievements over the past year, focusing on how you saved the company money or generated revenue. Ask for a specific number (e.g., a 10% increase) rather than a vague "raise." Finally, time your request 2-3 months before annual budgets are finalized, rather than waiting for your official performance review.