Was that raise actually a raise?
Raise minus inflation is the wrong sum. See the real change, what tax takes of it, and what a run of these years adds up to.
The headline percentage, on gross pay.
Use the published rate for the year the raise covers, not a forecast.
More options(3)
Your own contribution, before the raise. It is scaled with the salary.
How many years in a row this raise and this inflation repeat.
a 3% raise against 4% inflation
-1% in real terms
Your salary goes from $60,000 to $61,800, which in the money you had before is $59,423 — a real cut of $577 a year. The subtraction most people do says -1%; the real figure is -0.96%, because the shortcut overstates the cut. After tax it is worse still: take-home falls 1.1% in real terms, because the extra gross was taxed at 20% while your salary as a whole is not.
- Real change, gross
- -1%
- Real change, take-home
- -1.1%
- Raise needed to stand still
- 4.2%
Where “raise minus inflation” goes wrong
| Method | Says |
|---|---|
| Subtraction3% − 4% | -1% |
| The actual change(3% − 4%) ÷ 1.040 | -0.96% |
The two are not independent sums — the real change is exactly the subtraction divided by 1.040, because your raise applies to last year's salary while inflation applies to this year's prices. Dividing by a number larger than one always shrinks the result toward zero, which is why the shortcut overstates a gain and overstates a cut alike. It never errs toward calm. The same correction, applied to investment returns, is on the real return calculator.
If this repeats
Real terms, compounding
| After | Buying power | Salary worth |
|---|---|---|
| 1 year | -1% | $59,423 |
| 2 years | -1.9% | $58,852 |
| 3 years | -2.9% | $58,286 |
| 4 years | -3.8% | $57,725 |
| 5 years | -4.7% | $57,170 |
5 years of this leaves you 4.7% down in real terms — the equivalent of earning $57,170 today instead of $60,000. Each year on its own looks survivable, which is exactly how the total gets to that size unnoticed. The right-hand column is gross; after tax the picture is a little worse again.
The raise that would have kept you level
To leave your take-home pay unchanged in real terms you needed 4.18%, not 4%. The gap exists because the extra gross is taxed at 20% — your rate on the next unit of pay — while the inflation you are trying to match applies to every pound and dollar you actually spend.
One assumption, stated plainly: this holds the tax thresholds where they are today. That is the right question when thresholds are frozen, and the wrong one where they rise with prices each year — and whether they move is a policy decision nobody has made yet. This site does not forecast policy, so the figure is computed on today's published bands. Where thresholds do get uprated, the true answer sits closer to inflation than this.
Where to go next
- Take-home pay — the full breakdown behind the net figures here, including your marginal rate.
- Real return — the same correction applied to investment returns rather than pay.
- Inflation — what a given amount will be worth later, in both directions.
Shown in USD because tax bands only mean anything in their own currency. This page ignores the currency selector in the header — the site-wide setting changes formatting only and performs no conversion, so applying it here would put the wrong symbol on a real statutory figure.
The figures this uses
Tax year 2026 — last verified 2026-08-30
| Figure | Value | Source |
|---|---|---|
| Standard deduction | $16,100 | IRS |
| Income tax bands | 10% from $0 to $12,400 · 12% from $12,400 to $50,400 · 22% from $50,400 to $105,700 · 24% from $105,700 to $201,775 · 32% from $201,775 to $256,225 · 35% from $256,225 to $640,600 · 37% above $640,600 | IRS |
| Social Security | 6.2% from $0 to $184,500 · 0% above $184,500 | Social Security Administration |
| Medicare | 1.45% from $0 to $200,000 · 2.35% above $200,000 | IRS |
Not included, and it matters:
- State and local income tax — substantial in most states, zero in a few
- Head of household filing status, pending a full published bracket schedule
- Self-employment tax (this models an employee on payroll)
- Itemised deductions, tax credits, and the Alternative Minimum Tax
- HSA, FSA and other pre-tax benefits beyond the "other pre-tax" input
- The additional standard deduction for filers who are 65 or over, or blind
Why subtraction is the wrong sum
A 3% raise against 4% inflation feels like it should be 1% down, and almost every article you will read says exactly that. It is not what happened, and the reason is worth thirty seconds.
Your raise is applied to last year's salary. Inflation is applied to this year's prices. The two percentages are taken from different bases, so they cannot simply be subtracted. The real change is (1 + raise) ÷ (1 + inflation) − 1, and there is a tidy way to see what that does:
The real change is the subtraction divided by (1 + inflation). That is not an approximation, it is the same expression rearranged. Dividing by a number greater than one always pulls the result toward zero — so the shortcut overstates a gain and overstates a cut. It never errs in the direction of calm, which is worth knowing before you take it into a pay conversation.
At small numbers the difference is a rounding error and nobody should lose sleep over it. At double-digit inflation it stops being one. The same correction, applied to investment returns instead of pay, is on the real return calculator.
Your raise is gross. Your rent is not.
The second thing that separates a raise from a raise is tax, and it bites harder than people expect — because the extra pay is taxed at your marginal rate, the rate on the next unit of income, while the salary as a whole is taxed at your lower effective rate. A 5% rise in gross is never a 5% rise in what lands in the bank.
That is why this page shows a raise you needed just to stand still, and why it is higher than inflation. It uses the same statutory bands and sourced figures as the take-home pay calculator, with the tax year and source listed at the foot of the page.
One year is a shrug. Four is a pay cut.
Real changes compound, which means a run of slightly-below-inflation years does not add up, it multiplies down. Each year in isolation looks like something you would accept rather than argue about. The total, once you actually work it out, is usually larger than the number anyone had in their head — and it is the total, not the year, that decides what your salary is worth.
That is the whole argument for doing this sum on purpose rather than by feel, and it is the reason the table on this page runs the years out rather than stopping at one.
Common questions
What inflation figure should I use?
Why is the raise needed to stand still higher than inflation?
Does this assume tax thresholds stay where they are?
Should I use this to argue for a bigger raise?
Is a pay cut in real terms the same as a pay cut?
Not tax or financial advice. Tax figures are statutory and sourced, with the tax year and origin listed on the page, but they describe the bands as they stand today and do not anticipate changes. Inflation is a figure you supply.
Not advice. This tool applies arithmetic to assumptions you entered. It does not know your circumstances, your tax position or your goals, and it is not a recommendation to buy, sell or hold anything. Past returns do not predict future ones, and no figure here is a forecast.