Posted by Fletcher Accounting and Tax Service Inc.

How Getting A Raise Affects Your Taxes

How Getting A Raise Affects Your Taxes

The effect of a salary raise on taxes has changed considerably since the recent passage of the Tax Cuts & Jobs Act of 2017. There are still seven distinct personal tax brackets, but their income ranges are different. And with the doubling of the standard deduction, and the elimination of personal exemptions, individual taxpayers who receive raises at work need to pay attention to the new law.

Will That Raise Affect Your Tax Bill?

In order to figure out how much you will pay in taxes after your raise, you need to decide whether you'll be taking the standard deduction or itemizing. The new standard deduction has almost doubled, and itemization rules are much stricter. That means about 90 percent of all taxpayers will be using the standard deduction. Below is an example of how a raise would affect the total amount of taxes you pay.

Example: Getting a Raise as a Single Taxpayer

Remember that individuals are often "in" several tax brackets simultaneously because of the way the law works. If you are a single taxpayer earning $36,050, and you get a $10,000 raise, take the standard deduction of $12,000, and have no other income or deductions, you'll figure your taxes this way: $46,050 minus the $12,000 standard deduction equals $34,050 in taxable income. The first $19,050 of your income is taxed at 10 percent, the remaining $15,000 is taxed at 12 percent. The result is a tax bill of $1,905 plus $1,800, or $3,705. That's assuming your employer withheld nothing (which isn't realistic but helps us formulate the example).

Before your $10,000 raise, your taxes would have been $36,050 minus the standard deduction of $12,000: thus $24,050 of taxable income. The first $19,050 of that income is taxed at 10 percent, the remaining $5,000 is taxed at 12 percent. The result is a tax bill of $1,905 plus $600, or $2,505.

Your $10,000 raise caused your total tax bill to go up by $1,200, but you still had an increase in "take-home" pay of $8,800 from the raise.

The Myth of Being "Kicked Into" a Higher Bracket

There's a common myth that getting a raise immediately subjects your entire income to the rate of the higher tax bracket. That's not true. In reality, the U.S. taxation system imposes rates at various levels of your income. In the example above, it's clear that getting a raise will not leave you with less money. You might have to pay a higher rate on some of your income, but a raise will always result in more money in your pocket, no matter what tax brackets you're in.

Get Professional Help With Your Accounting and Tax Needs

Fletcher Accounting & Tax Service, Inc., has the professions team in place to handle all kinds of taxation challenges and financial situations individuals and small businesses face. Call them directly at (561) 586-7110, or via email:

For more information about the firm, visit their website, They look forward to speaking with you and discussing your questions about taxes, financial planning, accounting systems, bookkeeping and more.

Fletcher Accounting and Tax Service Inc.
Contact This Member