Compensation decision guide
Compare a bonus now with a raise that continues each year
A one-time bonus can produce more cash immediately, while a permanent raise adds recurring pay and may grow with later percentage increases. How long you remain in the job can matter more than the headline amounts.
This calculator compares incremental compensation over the same salary baseline. It shows expected after-tax cash, the timing of that cash, and employer retirement contributions separately.
How to use this tool
Enter the permanent annual increase
Use the extra yearly salary, not the new total salary or monthly paycheck change.
Describe the bonus payment
Enter its one-time amount, payment month, and the chance of actually receiving it.
Set a common time horizon
Use your expected tenure and the same future merit percentage for both salary paths.
Check taxes and plan terms
Enter tax assumptions and only the employer contributions you can earn and retain under your plan.
Example: $10,000 bonus or $3,000 annual raise?
Assume five years in the job, no future merit growth, a 30% combined incremental tax assumption for both choices, no extra employer contributions, and a 0% discount rate. The bonus provides $7,000 after estimated taxes. The raise provides $2,100 per year, or $10,500 over five years.
The raise adds $175 of after-tax cash per month, so it reaches the $7,000 bonus after 40 monthly payments. The five-year cash advantage is $3,500. If you stay only one year, the bonus instead provides $4,900 more cash. Use “Load simple example” to reproduce these figures.
Example: a 50% chance of an $8,000 bonus
Compare a $2,000 permanent raise with a one-time $8,000 bonus paid now at a 50% chance of payment. Assume two years, 5% annual merit growth, 25% tax on both, a 4% fully vested employer contribution on eligible extra pay, and no discounting.
The bonus expected value is $4,000 gross and $3,000 after estimated taxes, plus $160 in expected employer contributions. Actual after-tax bonus cash under this assumption is either $6,000 or zero. The raise adds $2,000 gross in year one and $2,100 in year two: $3,075 after estimated taxes and $164 in employer contributions. Its cash advantage is $75, with catch-up in month 24.
Bonus withholding is different from final tax
Payroll may withhold federal income tax from a bonus using a supplemental-wage method. That amount is a tax payment toward your annual liability, not a separate final tax rate for bonus income. Enter the incremental income and employee payroll tax you expect to owe under each scenario.
The calculator applies your assumed rates uniformly. It does not determine brackets, Social Security wage caps, credits, or the tax effect of employee retirement contributions.
Read the terms before valuing the offer
- Whether the bonus is contractual, discretionary, or dependent on a target
- Payment date, employment requirements, and any repayment or clawback clause
- Whether future merit increases apply to the raised base
- The retirement plan’s eligible compensation, contribution limits, and vesting schedule
Planning scenarios only. Confirm the written offer and retirement-plan terms. The model does not calculate bonus clawbacks, severance, pensions, employee deferrals, tax brackets, or contribution limits, and it assumes the raise remains in force for your entered tenure.
Sources and further reading
- IRS: Publication 15 (2026), supplemental wages — Federal payroll withholding methods for bonuses and other supplemental wages.
- IRS: Tax withholding — How withholding relates to estimated annual tax liability.
- IRS: Retirement plan contributions — Employer matching, plan contributions, and plan-document requirements.
Frequently asked questions
How do I find when a raise is worth more than a bonus?
With no growth or discounting, divide the after-tax bonus by the extra monthly after-tax salary. The calculator also handles annual merit growth and payment timing, and shows catch-up only if it occurs within your entered tenure.
Should I use the bonus withholding percentage as its tax rate?
Use an estimate of incremental tax liability, including applicable employee payroll taxes. Withholding is a payment toward the final annual tax calculation and can be higher or lower than the eventual tax on the additional income.
Does a 50% chance mean I will receive half the bonus?
No. This model assumes the entire entered bonus is paid or no bonus is paid. Multiplying by the chance of payment produces an expected value for comparison; it does not forecast your actual payout.
Why are employer retirement contributions separate from cash?
Employer contributions may have vesting rules, contribution limits, and tax treatment that differ from wages. They are not automatically available to spend now. The tool applies your entered eligibility and vesting assumptions and does not add them to the cash-based winner.