How much of a raise do you keep?

The myth: a raise can push you into a higher bracket and lower your pay

It cannot, at least not through income tax brackets. U.S. income tax is marginal: each rate applies only to the dollars inside its band. When a raise pushes part of your income into a higher bracket, only the part above the line is taxed at the higher rate. Everything below is taxed exactly as before. So a raise always increases take-home pay; it is just smaller than the headline number.

(There are rare exceptions outside the brackets, where a benefit or credit stops all at once at an income limit, such as some state exemptions and subsidies. Illinois, for example, removes its personal exemption entirely above a set income. These cliffs are uncommon for ordinary wages.)

What a $5,000 raise is worth

The table shows a $5,000 raise on a $60,000 salary, single filer, paid every two weeks.

The spread comes from state and local taxes. Federal income tax, Social Security and Medicare take the same share everywhere; the rest depends on your state's marginal rate and any city or county tax. A local wage tax charged on all pay, like Philadelphia's or Columbus's, takes its full rate from every extra dollar.

How your share changes with income

Your marginal rate rises in steps as income grows, so the share of each extra dollar you keep usually falls. For a single person in Texas, with no state tax:

• At $40,000, about $80.35 of each extra $100.
• At $100,000, about $70.35.
• At $190,000, about $74.55.
• At $250,000, about $65.65.

The pattern is not perfectly smooth. Social Security stops at $184,500 of wages, so earnings above that keep an extra 6.2%. And Additional Medicare adds 0.9% on wages above $200,000.

Some federal benefits shrink as income rises, which acts like a higher marginal rate for a range of income. The child tax credit falls by $50 for every $1,000 above $200,000 ($400,000 joint), and the tips and overtime deductions shrink above $150,000.

Hourly raises and overtime

For hourly workers, a raise also lifts the overtime rate, because overtime is paid at one and a half times the regular rate. The extra overtime pay is taxed like other wages, though the premium part (the extra half) can qualify for the federal overtime deduction of up to $12,500 a year ($25,000 joint) through 2028. That deduction lowers federal income tax only; Social Security, Medicare and most state taxes still apply. The overtime calculator shows the effect per paycheck.

Turning a raise into a budget number

1. Find your marginal rates: federal bracket, 7.65% for Social Security and Medicare, your state's top rate on your income, and any local tax.
2. Add them up and subtract from 100%. That is the share of the raise you keep.
3. Multiply by the raise and divide by your number of paychecks.

Or let the raise calculator do it for your state and city. It also shows the effect of keeping your 401(k) percentage the same: a percentage contribution grows with the raise, which lowers the change in take-home pay but adds to your savings.

Raise or move?

The same logic explains why a job in another city can be worth more or less than it looks. A $5,000 raise that comes with a move from a no-tax state into a city with a wage tax may leave you with less, not more. The job offer guide walks through those comparisons.