How to Calculate a 3.5 Percent Raise
Understand how a 3.5% pay raise truly impacts your personal finances. Get clarity on your new income and what to expect.
A percentage raise means the increase is calculated as a specific proportion of one’s current earnings. Consequently, a 3.5% raise indicates that an employee’s existing salary will increase by 3.5% of its current value.
Calculating Your New Gross Salary
To determine your new gross salary, the 3.5% raise is applied directly to your current gross pay. This calculation is straightforward, as it involves multiplying your present salary by 1.035. For example, if your current annual gross salary is $50,000, your new gross salary would be $50,000 multiplied by 1.035, resulting in $51,750. This formula provides the full new amount you will earn before any money is withheld.
The result is the total compensation you will receive over the year or pay period, not just the additional amount. Understanding this gross figure is the initial step in comprehending the financial impact of your raise.
Estimating Your New Take-Home Pay
Your new gross salary is not the amount that will be deposited into your bank account, as various deductions are withheld from it. Net pay is the amount remaining after these mandatory and voluntary deductions. Common mandatory deductions include federal income tax, state income tax (where applicable), Social Security tax, and Medicare tax.
Federal income tax withholding depends on your income level and filing status, following a progressive tax bracket system. State income taxes vary significantly, with some states having no income tax while others impose a flat or progressive rate. Social Security tax is 6.2% of your wages up to an annual limit, which is $176,100 for 2025, while Medicare tax is 1.45% of all wages.
Beyond these statutory deductions, many individuals also have pre-tax deductions, such as health insurance premiums or contributions to retirement plans like a 401(k). These pre-tax deductions reduce your taxable income, thereby lowering the amount of federal and often state income taxes withheld. However, most pre-tax deductions, except for certain exceptions like health savings accounts, do not reduce the wages subject to Social Security and Medicare taxes.
A 3.5% raise increases your gross income, which in turn typically increases the amount withheld for percentage-based deductions like federal, state, Social Security, and Medicare taxes. The exact impact on your net pay will vary based on your specific deductions, tax withholdings, and individual financial choices. Using an online paycheck calculator can provide a more precise estimate of your new take-home pay by factoring in these unique details.