What Happens to Your Paycheck When You Get a Raise

A clear guide to tax brackets, marginal rates, and how much of that raise you actually keep — with real numbers for every income level.

By US Payroll & Tax Research Analyst · Published: June 18, 2026 · Updated: July 25, 2026

The Key Concept: Marginal vs. Effective Tax Rates

To understand how raises affect your paycheck, you need to grasp two critical tax concepts:

Marginal Tax Rate

This is the tax rate that applies to the next dollar you earn. In 2026, federal marginal rates range from 10% to 37%. When you get a raise, only the new income you earn may be taxed at a higher rate — your existing income stays at its current rate.

Effective Tax Rate

This is your total tax divided by total income. Because the US uses progressive brackets, your effective rate is always lower than your marginal rate. For example, a single filer earning $80,000 in Texas has a marginal rate of 22% but an effective federal rate of about 13.2%.

How a Raise Actually Works: Example 1

Let's take a single filer in Texas earning $75,000 who gets a $5,000 raise ($80,000 new salary):

The Take-Haway

A $5,000 gross raise results in $3,323 additional take-home pay per year ($277/month). That's an effective "raise" of 6.5% on take-home, despite the gross being only 6.7% more. The tax on the marginal income is approximately $1,427, meaning you keep about 66% of the raise.

Example 2: Crossing a Tax Bracket

Now let's consider a bigger raise that pushes the employee into a higher bracket. Single filer in Texas earning $130,000 getting a $25,000 raise to $155,000:

What Happened to the Raise?

The $25,000 gross raise resulted in $12,328 extra take-home pay. That's about 49% — roughly half. The effective marginal tax rate on the additional $22,750 of taxable income is approximately 45% (federal + FICA), with a significant portion taxed at the 24% federal bracket.

Key Point: Bracket Jumps Are Not Catastrophic

Even when you cross into a higher tax bracket, only the income within the new bracket is taxed at the higher rate. In this example, the employee jumped from the 22% bracket into the 24% bracket. But the $22,750 of additional taxable income was split: about $19,100 was still in the 22% bracket, and only $3,650 was in the 24% bracket.

Raise Take-Home by Income Level

Here's a quick reference for how much you keep from a 5% and 10% raise at various income levels (single filer, Texas, 5% 401k):

401(k) Matching: The Tax Offset

One of the most effective ways to maximize your raise is to increase your 401(k) contribution. Since 401(k) contributions are pre-tax, they reduce your taxable income, effectively offsetting the tax impact of your raise.

Example: If you get a $5,000 raise and increase your 401(k) contribution by $5,000 (maximizing your employer's 5% match), your taxable income stays the same. The entire $5,000 raise goes into your 401(k) instead of being taxed — a 100% take-home rate for retirement savings.

The 2026 401(k) Limits

State Taxes: The Variable That Changes Everything

If you live in a high-tax state, the take-home portion of your raise is lower. Compare the same $80,000 employee with a $5,000 raise in Texas vs California:

Calculate Your Own Raise Impact

Use our dedicated Raise Pay Increase Calculator to see exactly how much of your raise you'll keep in your specific state and filing status.

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