A raise’s advertised percentage isn’t what actually lands in a paycheck — taxes take a share immediately, and inflation quietly erodes the rest.
How it works
The nominal raise is reduced by the marginal tax rate to find the after-tax raise. Subtracting what inflation alone would require just to maintain purchasing power on the old salary gives the real, inflation-adjusted gain.
What this does not include
This uses a flat marginal rate on the raise alone — a large enough raise could push some income into a higher bracket, a graduated-bracket effect this simplified flat-rate calculation doesn’t model (this site’s income-tax-bracket calculator can be run before and after for a more precise comparison).
How to use this calculator
- Enter old and new salary, your marginal tax rate, and the inflation rate.
Frequently asked questions
Can a raise actually reduce purchasing power?
Yes — if the after-tax raise is smaller than what inflation alone would require to keep pace, the real raise is negative, meaning purchasing power fell despite the nominal pay increase.
Why does this site’s inflation article mention a 5% raise during 3% inflation?
Because a 5% nominal raise still loses ground once taxes are subtracted and 3% inflation is accounted for — exactly the scenario this calculator quantifies directly.
Should I negotiate for a raise above the inflation rate?
If maintaining or growing real purchasing power is the goal, yes — a raise at or below current inflation, once taxes are subtracted, often represents a real pay cut rather than a gain.
