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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Sources & method
This calculator implements percentage-change arithmetic — standard financial mathematics that no single body maintains as an official standard. The formula is shown on this page so you can verify it.
Not financial or tax advice. This is an educational estimator. It does not know your full situation, and tax rules change. Akshaya Panda, who builds and verifies these tools, is an engineer — not a financial adviser, accountant, or tax professional. Before acting on a result that matters, check it with someone licensed to advise you.