A 5% raise sounds like 5% more money, and it is not. Social Security and Medicare take a flat share of every extra dollar, federal income tax takes the marginal rate, and if state tax applies it takes another slice. What arrives in your account is the after-tax figure.
Extra take-home pay per year
$2,410.50
A $3,000.00 raise (5%) lifts gross pay from $60,000 to $63,000.
| Before | After | Change | |
|---|---|---|---|
| Gross pay | $60,000.00 | $63,000.00 | $3,000.00 |
| Federal income tax | $5,020.00 | $5,380.00 | $360.00 |
| Social Security and Medicare | $4,590.00 | $4,819.50 | $229.50 |
| Take-home pay | $50,390.00 | $52,800.50 | $2,410.50 |
The change column shows how much of the raise goes to tax and how much reaches your account.
Only part of a raise is taxed away, and the tax rate on it is the marginal rate, not the average rate.
| Measure | Amount |
|---|---|
| Raise | $3,000.00 (5%) |
| Salary needed to keep pace with inflation | $61,500.00 |
| Real change in buying power | $1,500.00 |
| Real raise | 2.5% |
| Inflation assumed | 2.5% |
A raise below the inflation rate is a pay cut in real terms, even though the number on the contract is larger.
This calculator works out the new gross pay, the new take-home pay, and the difference per paycheck — then compares the raise with inflation to show whether your buying power actually rose.
Every extra dollar is taxed at your marginal rate, not your average rate. A single filer in the 12% bracket keeps 88 cents of each extra dollar before FICA; in the 22% bracket they keep 78 cents, and FICA takes 7.65% on top until the Social Security wage base is reached.
The result is that the "share of the raise you keep" line is always lower than 100%, and lower still for higher earners or where state tax applies.
If you contribute 5% of pay to a traditional 401(k), that percentage is assumed before and after the raise, so the contribution rises with the salary and the tax saving scales with it. The same applies to pre-tax health premiums entered as an input elsewhere.
Changing your contribution rate after a raise is often the cheapest way to absorb it: the raise pays for the extra savings while the tax bill barely moves.
A raise below inflation reduces buying power even though the number on the contract is larger. If prices rise 3% and your pay rises 2%, you are 1% worse off in real terms.
The inflation comparison needs a salary that merely keeps pace: current pay times one plus the inflation rate. The difference between that figure and your new salary is the real raise.
Each example below was run through the calculator on this page when the site was built, so the numbers match what you see when you enter the same inputs.
Extra take-home pay per year
$2,410.50
A $3,000.00 raise (5%) lifts gross pay from $60,000 to $63,000.
Most of the raise reaches the bank: FICA takes 7.65% and the rest falls in the 12% bracket.
Extra take-home pay per year
$7,365.00
A $10,000.00 raise (5%) lifts gross pay from $200,000 to $210,000.
At this income the marginal rate is 32% plus additional Medicare tax, so a smaller share of the raise is kept.
Extra take-home pay per year
$2,260.50
A $3,000.00 raise (5%) lifts gross pay from $60,000 to $63,000.
State tax takes a further slice of each extra dollar on top of federal tax and FICA.
Extra take-home pay per year
$964.20
A $1,200.00 raise (2%) lifts gross pay from $60,000 to $61,200.
More money in the account, less buying power than last year — the definition of a real pay cut.
Subtract FICA at 7.65% (until the Social Security wage base) plus federal income tax at your marginal rate, plus state tax where it applies. A 5% raise for a single filer in the 12% bracket typically leaves about 80 cents on the dollar.
No. Brackets are marginal: only the income above each threshold is taxed at the higher rate, so a raise always increases take-home pay. A bigger paycheck can withhold more than needed for the year, which shows up as a refund instead of a loss.
Divide the new salary by the old one and subtract one, then multiply by 100. Going from $60,000 to $63,000 is 63,000 ÷ 60,000 − 1 = 5%.
Ask in dollars when you know the market rate for the role, since percentages carry different weight at different salaries. Bring the outside data with you: a 4% raise on a low base may still be below the market rate for the work.
Usually yes, because most matches are a percentage of pay, so the employer contribution rises with the salary. If the match is capped at a flat dollar amount, the raise does not change it.
Pay adjusted for inflation. Nominal pay is the number on the contract; real pay is what it can buy. A 3% raise during 4% inflation is a 1% real pay cut.
Last reviewed 2026-09-14. This page is an estimate tool, not financial, tax or legal advice.Read the full disclaimer.