The rate on the next dollar

Published 2026-09-17 · Last reviewed 2026-09-22

Two numbers get called "your tax rate", and the confusion between them is what produces the belief that a raise can cost money. One is the rate applied to the last dollar you earn - the marginal rate. The other is the share of the whole salary that ends up as tax - the effective rate. This page computes both for the same person at three salaries, and shows what a raise actually does to take-home pay.

Three salaries, one filer

Take a single filer with no dependents, no pre-tax deductions and no state income tax, earning $60,000, $70,000 and $80,000 in turn. Federal income tax starts from taxable income, which is the salary minus the 2026 standard deduction of $16,100; Social Security and Medicare are withheld from wages, not from taxable income.

What the raise actually does

The raise from $60,000 to $70,000 is $10,000 of extra salary, and it does cross a bracket: the marginal rate moves from 12 percent to 22 percent. Take-home still rises, from $50,390 to $58,075 - $7,685, or about 77 percent of the raise. A bracket is a range, not a threshold: crossing into a new one re-prices only the dollars above the line, and leaves every dollar below it taxed exactly as it was. FICA behaves the same way here, at a flat rate, because this salary is far below the wage base where Social Security stops.

That is the arithmetic, and it is why "a raise can put you in a worse position" is false in this model. The exception that is real is not a tax bracket at all: it is a benefit that switches off when income crosses a line, so the next dollar costs the whole benefit instead of a percentage of itself. The ACA Subsidy Calculatoron this site models exactly that shape, and it is the kind of cliff worth checking before accepting a small raise. Nothing else on a payslip behaves that way.

Where these numbers come from

• The brackets and the standard deduction are the 2026 published figures - the same ones the income tax and paycheck calculators use. Every release checks in January that the table has not been left a year behind, which is the only reason a number like this can be printed on a page at all.
• FICA is a rate, not a bracket. Social Security is 6.2 percent of wages up to the annual wage base, Medicare is 1.45 percent with no cap, and the additional Medicare rate only starts at $200,000 of wages for a single filer - so on this ladder every dollar of wages is subject to the same rate.
• What this calculation deliberately leaves out. No state or local tax, no pre-tax retirement or insurance deductions, no credits. Each of those moves the answers, and each is a choice this page would otherwise be making on your behalf.

What this guide does not cover

It does not compute anyone's actual bill. Federal tax on a payslip is withholding - an estimate the employer makes from tables - and the difference between withholding and liability is settled at filing, which is why a raise can change a refund without changing the annual figure much. It also says nothing about state tax, credits such as the earned income or child tax credit, filing jointly, self-employment tax, or the phase-outs that this page deliberately only points at. And it is one illustration: a lower salary with pre-tax deductions is a different ladder with the same shape.

Price your own salary in the Income Tax Calculator, see what a specific raise does to each payslip in the Pay Raise Calculator, or work through take-home pay in the Paycheck Calculator.

Estimates only - not financial, tax or legal advice. Read the full disclaimer.