How much of a raise you keep
A raise is taxed at the top of your pay, not the average. Every extra dollar is taxed at your marginal federal rate, plus Social Security and Medicare, plus your state's top rate for your income. So the share of a raise you keep is lower than the share of your salary you keep. The calculator runs the full year twice, once on the old salary and once on the new one, and reports the difference in take-home pay.
A 5% raise on $75,000 in California is $3,750 a year before tax. After federal tax, FICA, California income tax and State Disability Insurance, take-home pay rises by $2,255, which is 60.1% of the raise and $86.73 in each of the 26 paychecks. The same raise keeps 70.4% in Texas and 64.5% in New York.
Raises at different salaries
The share you keep falls as pay rises, because each dollar is taxed at a higher rate. A $2,000 raise on $40,000 in California keeps $1,493, or 74.7%. A $10,000 raise on $200,000 keeps $6,212, or 62.1%. At high incomes Social Security may already have stopped for the year, which softens the drop, while Additional Medicare adds to it.
A flat raise works the same way. $3,000 on $75,000 in California adds $1,808 to the year's take-home pay, or $69.52 a paycheck.
Raise or promotion: what else to check
- Retirement match. If your employer matches 401(k) contributions as a percent of pay, the match grows with the raise too.
- Overtime eligibility. A move from hourly to salaried can end overtime pay; compare a typical year, not one paycheck.
- Benefits cost. Some employers price health premiums by salary band, which takes back part of a raise.
- Timing. A raise mid-year only applies to the paychecks after it starts; the calculator shows a full year at the new rate.
Asking for a raise in take-home terms
It helps to know what you are really asking for. If rent went up by $150 a month, covering it takes $1,800 a year of take-home pay. In California at $75,000, keeping 60.1% of each extra dollar, that is about $2,993 of gross raise. Turn the calculator around this way when you set a target: decide the monthly figure you need, then raise the gross until the extra take-home pay meets it.
Employers usually quote raises as a percent of base pay. A percent raise compounds over the years, so a higher raise early in a job is worth more than the same total spread out later. The compound interest calculator shows the same effect for savings.
What the inputs mean
- Current salary: yearly pay before tax.
- Raise: a percent of salary or a dollar amount a year.
- State, filing status and pay frequency: the same as on your current paycheck.
Common mistakes
- Fearing a higher bracket. Only the part of pay above the line is taxed at the higher rate.
- Applying your average tax rate to the raise. It understates the tax; the marginal rate is what applies.
- Forgetting the 401(k). If you contribute a percent of pay, part of the raise goes there automatically.
Raise questions
How much is a 5% raise on $75,000 after taxes?
The raise is $3,750 a year before tax. In California, single and paid every two weeks, you keep $2,255 of it, or $86.73 more in each paycheck. In Texas you keep $2,638.
Can a raise lower my take-home pay?
Not through federal income tax brackets: only the dollars above a bracket line are taxed at the higher rate, so more pay always means more take-home pay from those taxes. A raise can cost you elsewhere, if it ends eligibility for a benefit or credit that phases out by income, such as the earned income tax credit or help with health premiums.
When will I see the raise in my paycheck?
From the first full pay period after it takes effect. If it starts in the middle of a period, that paycheck usually blends the old and new rates, and a raise approved late can arrive as a one-time back-pay amount, which payroll may withhold at the supplemental rate.
Is my raise keeping up with prices?
Compare it with inflation. If prices rise 3% in a year, a $75,000 salary needs $2,250 more just to stand still, which is $1,356 after tax in California. Anything above that is a real increase.
Sources
Rules checked . How we calculate.