Why a raise shrinks on the way to your paycheck
Every extra dollar you earn is taxed at your top rates, not your average rate. For most people that means the federal bracket the raise falls into, plus 7.65% for Social Security and Medicare, plus any state tax. A single filer earning $70,000 in a state with a 4% income tax pays 22% federal on a raise, 7.65% in payroll tax and 4% to the state, so roughly two-thirds of the raise reaches the bank.
The good news is that a raise can never leave you worse off. Because the higher bracket applies only to the dollars above the threshold, crossing into it simply means those last dollars are taxed a little more. This calculator works out your full take-home pay before and after the raise and shows the difference, so the answer includes every bracket the raise touches.
Making the most of a raise
Putting part of a raise into a traditional 401(k) before you get used to spending it is one of the easiest ways to save, because the contribution also avoids federal and most state income tax. If your employer matches contributions, the raise is also a good moment to make sure you contribute at least enough to receive the full match. See the take-home pay calculator to test different contribution levels.
Common questions
How much of a $5,000 raise will I keep?
Usually between 60% and 75%, depending on your federal bracket and state tax. A single filer earning $70,000 with a 4% state rate keeps about $3,320, or about 66%.
Can a raise put me in a higher bracket and lower my pay?
No. Only the income above each bracket threshold is taxed at the higher rate, so take-home pay always rises with a raise.
Sources
This calculator gives estimates for planning. Real returns, rates and prices change, so treat the result as a guide rather than a promise. Read how we build and check our calculators.