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Bonus vs Raise Calculator

Should you take a one-time bonus or a permanent raise? Compare the bonus with the extra pay a raise brings over the years you expect to stay, after tax, and see when the raise catches up.

Current annual salary

One-time bonus offered

Raise offered instead

Years you expect to stay

Future yearly raises

Tax rate on the extra pay

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How it works

first-year raise = salary × raise % · raise in year k = first-year raise × (1 + future raises)^(k − 1) · raise total = Σ over the years you stay · difference after tax = (raise total − bonus) × (1 − tax rate)

A bonus is paid once; a raise is paid every year and becomes the base for future percentage raises, bonuses and often retirement contributions, so it usually wins if you stay long enough. A bonus wins when you expect to leave soon, need cash now, or when the raise is small. This comparison ignores the time value of money; with a short horizon or a high interest rate, money now is worth a little more. Raises also improve the starting point for your next salary negotiation.

Worked example

On a $60,000 salary, a 5% raise is $3,000 in the first year and, with 3% future raises, adds up to $15,927.41 over 5 years versus a $5,000 bonus. After a 25% tax rate that is $11,945.56 against $3,750.00, so the raise is the better choice by a difference after tax of $8,195.56. The raise catches up with the bonus in year 2.

Sources: US BLS — Employer costs for employee compensation · IRS — Publication 15 (supplemental wages)

Frequently asked questions

Is a raise better than a bonus?

Usually, if you stay more than a year or two: a raise repeats every year and compounds with later raises. A one-time bonus is better if you plan to leave soon or the raise is very small.

Are bonuses taxed more than raises?

Bonuses are often withheld at a different rate, but the final income tax is the same — both are ordinary income. Withholding differences come back when you file.

When does a raise catch up with a bonus?

When the cumulative extra pay from the raise exceeds the bonus. A 5% raise on $60,000 ($3,000 a year) passes a $5,000 bonus in year 2.

What else should I weigh?

Raises can lift pension or 401(k) matches, overtime and future offers, while a bonus may come with a clawback if you leave early. Include them in your decision.

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Estimate the take-home value of a 2026 bonus after the 22% federal supplemental withholding (37% above $1 million), Social Security up to the $184,500 wage base, Medicare and the 0.9% Additional Medicare Tax, state tax and 401(k), and see whether 22% is more or less than the tax you will owe.

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See what a bigger counteroffer is really worth — the lifetime value of negotiating a higher raise, since every future raise compounds on top of it.

Estimate for planning only — not tax, legal or financial advice. Tax rates, thresholds and rules depend on your country and situation; confirm with your tax authority or a qualified adviser before you rely on the figures.