Pay Raise Calculator
A pay raise is taxed at your marginal rate — not your average rate. A $5,000 raise in the 22% federal bracket + 5% state tax + 7.65% FICA costs about 35% in taxes, netting you approximately $3,250 more per year ($271/month). This calculator shows the exact after-tax math for your raise.
Enter your current salary, raise details, and tax rates to see your net take-home increase monthly, biweekly, and annually.
Why Your Raise Feels Smaller Than Expected
A $5,000 annual raise sounds significant. But after federal and state income taxes and FICA, you typically keep only 62%–68% of it. At a 22% federal rate, 5% state, and 7.65% FICA, the combined marginal rate is 34.65%. Your $5,000 raise nets approximately $3,268 — or $272 more per month. Still meaningful, but understanding this helps set realistic expectations and makes financial planning more accurate.
The important concept: raises are taxed at your marginal rate, not your average (effective) rate. If you're in the 22% federal bracket, every additional dollar you earn is taxed at 22% federal — even if your overall average rate is only 14%. Your first dollars of income were taxed at 10% and 12%; only income above certain thresholds reaches the 22% bracket. A raise doesn't retroactively change the tax on income you've already earned.
What to Do With a Pay Raise
A raise is an opportunity for a financial reset. Common frameworks: the "50/30/20 raise rule" — put 50% of the net raise toward financial goals (extra savings, debt payoff), 30% toward lifestyle improvements, and 20% toward a buffer. Or simply: increase your 401k contribution percentage by 1%–2% immediately after the raise, so the new savings habit forms before lifestyle inflation absorbs the difference.
| Federal Bracket | +5% State | +7.65% FICA | Net Annual | Net Monthly |
|---|---|---|---|---|
| 12% | 17% | 24.65% | $3,768 | $314 |
| 22% | 27% | 34.65% | $3,268 | $272 |
| 24% | 29% | 36.65% | $3,168 | $264 |
| 32% | 37% | 44.65% | $2,768 | $231 |
To see your full monthly budget including the impact of a raise on savings potential, use the Monthly Budget Calculator. For wealth projection with your new income, see the Wealth Calculator.
Frequently Asked Questions
How much of a raise do I actually take home?
A raise is taxed at your marginal rate. In the 22% federal bracket with 5% state and 7.65% FICA, you keep about 65% of a raise. A $5,000 raise nets approximately $3,268 after taxes — $272/month. Use this calculator with your specific rates for a precise figure.
What is a marginal tax rate?
The marginal rate is the tax rate on the last dollar of income — the rate your raise is taxed at. It's different from your effective (average) rate. If you're in the 22% bracket, your raise is taxed at 22% federal — not the 14% average rate you might pay overall on all your income.
Will a raise push me into a higher tax bracket?
Only the portion above the bracket threshold is taxed at the higher rate. If a raise pushes $5,000 of income across a bracket boundary, only those $5,000 face the higher rate — not all your income. Tax brackets are marginal, not cliffs.
What should I do with a pay raise?
Best first move: increase your 401k contribution by 1%–2% immediately. This reduces your taxable income (partially offsetting the higher bracket) and builds retirement savings before lifestyle inflation absorbs the difference. Then apply the net increase to financial goals: emergency fund, debt payoff, or additional investments.
Is a 3% raise good?
A 3% raise keeps pace with typical inflation in normal times but doesn't improve your real purchasing power. With 3%+ inflation, a 3% raise is effectively a flat or slight real pay cut. For career advancement, financial advisors typically recommend negotiating for 5%–10% raises to meaningfully improve your financial position. Use this calculator to see the exact dollar impact of any raise percentage.
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