How a Pay Raise Affects Your Take-Home Pay

When you get a pay raise, the amount that appears in your paycheck is always less than the raise amount. The gap between the gross raise and the after-tax increase is determined by your marginal tax rate — and understanding the difference between marginal and effective rates is the key to setting realistic expectations.

Effective tax rate vs marginal tax rate

Your effective tax rate is the percentage of your total income that goes to taxes. It is calculated by dividing total tax paid by total income. On a $75,000 salary, a single filer might pay around $14,000 in total taxes (federal + FICA + a mid-range state tax), producing an effective rate of about 18.7%.

Your marginal tax rate is the rate applied to your next dollar of income. Because the US uses a progressive tax system, income is taxed in layers called brackets. Only the income in the highest bracket is taxed at the marginal rate — not all of your income.

These two numbers are almost always different, and the marginal rate is almost always higher.

What you actually keep from a $10,000 raise

The taxes that apply to a raise are:

• Federal income tax at your marginal bracket rate (22% for a significant portion of the $50,000–$120,000 single-filer income range in 2026)
• State income tax at your state marginal rate (0% in Texas and Florida; up to 9.3% in California for incomes in this range)
• FICA at 7.65% (unless your total wages already exceed the Social Security wage base)

For a single filer currently earning $75,000 in a state with a 5% income tax receiving a $10,000 raise:

• Federal income tax on the raise: ~22% = $2,200
• State income tax: ~5% = $500
• FICA: 7.65% = $765
• Total deductions from the raise: ~$3,465
• Net take-home from the $10,000 raise: ~$6,535

This is why a $10,000 raise often produces a paycheck increase that feels like $6,000–$7,000 depending on the state.

Bracket creep is less dramatic than it sounds

Many workers worry that a raise will "push them into a higher tax bracket" and somehow result in less take-home pay. This cannot happen in a progressive tax system. Only the income above a bracket threshold is taxed at the higher rate — not your entire income. Moving from the 22% bracket into the 24% bracket means only the dollars above the 24% threshold are taxed at 24%. All dollars below that threshold continue to be taxed at their existing rate.

A raise that crosses a bracket threshold will reduce the net value of the dollars above the threshold slightly — but the total take-home always increases with a raise.

How a 401(k) contribution can improve the after-tax math

If you increase your traditional 401(k) contribution alongside a raise, you reduce the federal and state income tax impact on the new income. Routing $500 per month of a raise into a 401(k) reduces your federal taxable wages by $500, saving you approximately $500 × (federal marginal rate + state marginal rate) in income taxes. FICA still applies to the full raise regardless of 401(k) contributions.

Frequently asked questions

Can a raise ever reduce my take-home pay?

No. Under the US progressive tax system, a higher gross income always results in higher net take-home pay. Only the incremental income above a bracket threshold is taxed at the higher rate, not your entire income.

How do I calculate exactly what I'll keep from my raise?

Enter your current and new salary into a paycheck calculator for your state and compare the biweekly take-home amounts. The difference is your net per-period increase from the raise.

Does a raise affect my FICA taxes?

Yes, unless your wages already exceed the Social Security wage base ($184,500 in 2026). Below that threshold, FICA is 7.65% on every additional dollar. Above it, only Medicare at 1.45% applies to additional wages.