US money guide
What a raise is really worth
You negotiated $10,000. Your monthly take-home went up by around $500. Nothing went wrong — you just experienced the gap between gross and marginal, and nobody explains it before the conversation.
Marginal, not average
Your effective tax rate is what you pay across all your income. Your marginal rate is what the next dollar is taxed at — and a raise is entirely made of next dollars.
Stack them up: 22% or 24% federal, 7.65% FICA, and state tax anywhere from 0% to 13%. In California at $150,000 you can be keeping around 58 cents of each additional dollar. In Texas at the same salary, closer to 70 cents.
What to negotiate when salary is capped
Some things are worth more than their headline value because of how they're taxed:
- 401(k) match increase — pre-tax and immediate return, worth more per dollar than salary.
- HSA contributions — avoid income tax and FICA, the only benefit that dodges both.
- Health premium coverage — pre-tax and often worth thousands.
- Remote work — commuting costs are paid with after-tax dollars, so eliminating them is worth more than an equivalent raise.
- PTO — untaxed entirely.
The mistake with equity
RSUs are often pitched as if they're tax-advantaged. They aren't: they're taxed as ordinary income at the moment they vest, at full marginal rates, usually with only 22% withheld — which is why high earners get a bill in April. Options can be different, but RSUs are simply salary paid in stock, with the added risk of being concentrated in your employer.
One last thing
If a move takes you across a state line, run both numbers. A $10,000 raise that comes with a move from Texas to California can leave you worse off than staying put — and that's before rent.
Quick answers
How much of a raise do you actually keep?
Every extra dollar is taxed at your marginal rate plus FICA plus state tax. A basic higher earner in a high-tax state often keeps only 55–65 cents of each additional dollar.
Is a bonus taxed higher than salary?
No. Bonuses are withheld at a flat 22% but taxed as ordinary income when you file. If your marginal rate is higher, you owe more; if lower, you get a refund.
Should I negotiate salary or equity?
Salary is certain and pensionable; equity is uncertain but can be worth far more. RSUs are taxed as ordinary income at vest, so they are not tax-advantaged relative to salary.
Written in plain English by mytakehome.money. General information, not financial advice — check anything important at gov.uk or with a qualified adviser.