How Raises Affect Your Net Pay
Each salary increase moves some income into higher marginal tax brackets and increases FICA contributions. Understanding the net effect of raises helps you set realistic salary expectations and plan your personal budget.
Federal Tax Calculation
Federal income tax is progressive: income in each bracket is taxed at that bracket's rate. The standard deduction ($14,600 single / $29,200 MFJ in 2024) reduces taxable income before brackets are applied.
FICA Taxes
Social Security (6.2%) applies to wages up to $168,600 (2024). Medicare (1.45%) applies to all wages. For most salary levels, total FICA is 7.65% of gross pay.
Frequently Asked Questions
Traditional 401(k) contributions are pre-tax, reducing your taxable income dollar for dollar. Contributing 6% of a $70,000 salary reduces federal taxable income by $4,200, which at a 22% bracket saves about $924 in taxes.
The US progressive tax system applies higher rates to income in higher brackets. A $5,000 raise at a 12% marginal rate adds $367/month net; the same raise at a 32% rate adds only $283/month net.