How Federal Income Tax Works With a Raise
The U.S. uses a progressive federal income tax system — you pay increasingly higher rates only on income above each bracket threshold. A raise does not tax all your income at a higher rate, only the portion above the bracket line. This means the tax impact of a raise is often smaller than people fear, though it does meaningfully reduce your net take-home versus the gross raise amount.
2025 federal income tax brackets (single filer)
| 2025 Federal Tax Bracket | Rate | Taxable Income (Single) |
|---|---|---|
| 10% | 10% | $0 - $11,925 |
| 12% | 12% | $11,926 - $48,475 |
| 22% | 22% | $48,476 - $103,350 |
| 24% | 24% | $103,351 - $197,300 |
| 32% | 32% | $197,301 - $250,525 |
| 35% | 35% | $250,526 - $626,350 |
| 37% | 37% | Over $626,350 |
Your marginal rate is the rate on your last dollar of income. Your effective rate is what you actually pay on total income. Someone in the 22% bracket may have an effective rate of only 13-15% on their full income.
What a Raise Costs You in Taxes: Real Examples
Estimated net take-home after federal taxes at various raise scenarios
| Current Salary | Raise | Gross Annual Gain | Est. Tax Cost (22% bracket) | Net Annual Gain |
|---|---|---|---|---|
| $52,000 | 4% ($2,080) | $2,080 | ~$624 | ~$1,456 |
| $68,000 | 5% ($3,400) | $3,400 | ~$1,020 | ~$2,380 |
| $85,000 | 4% ($3,400) | $3,400 | ~$1,020 (22% bracket) | ~$2,380 |
| $105,000 | 5% ($5,250) | $5,250 | ~$1,260 (24% bracket) | ~$3,990 |
| $130,000 | 6% ($7,800) | $7,800 | ~$1,872 (24% bracket) | ~$5,928 |
FICA Taxes: Social Security and Medicare
In addition to federal income tax, your raise increases your FICA contributions (unless you have already hit the Social Security wage base of $176,100 in 2025). Social Security is 6.2% and Medicare is 1.45% — combined 7.65%. On a $3,000 raise, that is an additional $229.50 in FICA taxes. If you are self-employed, you pay both the employee and employer sides (15.3% total).
- Social Security tax: 6.2% on income up to $176,100 (2025)
- Medicare tax: 1.45% on all income with no cap
- Additional Medicare Tax: 0.9% on income above $200,000 (single) or $250,000 (married)
- State income tax: varies from 0% (nine states) to 13.3% (California top bracket)
- Total effective tax on a raise: typically 27-38% combined federal + state + FICA for most workers
Should You Update Your W-4 After a Raise?
If your raise is 5% or more, it is worth reviewing your W-4 withholding. Use the IRS Tax Withholding Estimator (irs.gov/W4app) to check whether your current elections will result in a refund, a bill, or balanced withholding. A significant raise can push withholding short if you have the same number of allowances from a lower-income year.
Calculate Your Raise Before and After Taxes
See your gross raise, estimated tax impact, and net take-home with the pay raise calculator.