Your employer offers you a $5,000 raise. Good news — but on your paycheque, the increase will be quieter than the number you were told. Part of it goes to tax, another part to contributions, and what lands in your pocket can be almost half of what was announced. Here's why, and how much you really keep.
Why you never keep a raise in full
Not all of your dollars are taxed at the same rate. Your first dollars of the year are taxed lightly; the last ones, at the top of your salary, much more heavily. The rate that hits that last dollar — and therefore your raise — is called the marginal rate: the rate applied to the next slice of income you earn.
That rate decides the fate of your raise, not the average rate you pay across your whole salary. The two are easily confused even though they measure different things (we break down the difference between marginal and average tax rates in another article). A raise stacks on top of your income, where the rate is highest, so it "pays" proportionally less than your base salary.
$5,000 more on a $60,000 salary: the math
Take a concrete case. You earn $60,000 a year in Quebec. Here is what your mandatory deductions already take, before the raise:
| What gets withheld | Annual gross | Share of gross |
|---|---|---|
| Federal tax | −$4,633 | 7.7% |
| Provincial tax | −$5,386 | 9.0% |
| QPP | −$3,560 | 5.9% |
| Employment Insurance | −$780 | 1.3% |
| QPIP | −$258 | 0.4% |
| Total withheld | −$14,617 | 24.4% |
| Annual net | $45,383 | 75.6% |
That leaves you with about $45,383 net, roughly $3,782 a month. Now add the $5,000 raise, which brings you to $65,000. Your net pay, though, does not climb by $5,000:
| Gross salary | Net per year | What changes |
|---|---|---|
| $60,000 | $45,383 | — |
| $65,000 | $48,279 | + $2,896 |
On a $5,000 raise, you keep about $2,896 — a little under 58%. The roughly $2,104 missing (nearly 42% of the raise) goes to tax and contributions. You can run the same exercise with your own salary in the Salarium calculator.
Tax first, but not only
Why a bite of nearly 42%, when no income tax rate reaches that level at this salary? Because two deductions stack on top of your raise.
Income tax. At $60,000, your next dollar falls into an already well-taxed bracket. The 2026 federal brackets apply 20.5% above $58,523, and Quebec adds 19% within that same bracket. After the Quebec abatement, which lowers the federal share, the combined marginal tax rate is around 36%. That is the figure the calculator shows as your "marginal rate."
Contributions. At $60,000, you have not yet reached the ceilings of the social programs, so every extra dollar is still subject to them. The QPP (Quebec Pension Plan, the public pension) takes about 6.3% up to income of $74,600; Employment Insurance withholds 1.30% up to $68,900; and the QPIP (the parental insurance plan) adds 0.43%. Together, these contributions claw back nearly another 8% of your raise.
Tax (about 36%) plus contributions (about 8%), minus a few credits tied to those same contributions: you land back on that bite of about 42%.
The bite isn't the same at every salary
What happens to a raise depends on where you stand. Here is what you would keep on a $5,000 increase, depending on your starting salary:
| Starting salary | Net kept on + $5,000 | Share that vanishes |
|---|---|---|
| $40,000 | $3,417 | 32% |
| $60,000 | $2,896 | 42% |
| $90,000 | $3,178 | 36% |
| $130,000 | $2,666 | 47% |
Two mechanisms drive these gaps:
- Tax brackets. The higher your salary, the more your raise lands in a heavily taxed bracket. At $130,000, it is taxed at nearly 46%, hence the 47% that disappears.
- Contribution ceilings. The QPP stops deducting above $85,000 of income, and Employment Insurance above $68,900. Past those thresholds, these contributions no longer touch your raise. That explains the paradox on the $90,000 line: you keep more (36%) than at $60,000 (42%), because you have cleared the ceilings and only tax keeps biting.
What to keep in mind before you negotiate
A raise is always worth it: you end up with more net pay, every time. But to judge an offer at its true value, think in net, not gross.
- Around average salaries, expect to keep roughly half of a raise once tax and contributions are taken out.
- A bonus follows the same rule: it stacks on top of your income and is taxed at your marginal rate.
- As you clear the QPP and Employment Insurance ceilings, a larger share of your raises comes back to you — until the higher tax brackets take over.
A raise will never cost you money: only the slice above a threshold is taxed more heavily, so earning more always leaves more net. You simply keep a smaller share of it than the figure on the offer letter.
Frequently asked questions
How much do I really keep on a $5,000 raise?
It depends on your salary. Around $60,000 in Quebec, you keep about $2,900 net out of $5,000 — the rest, nearly 42%, goes to income tax and contributions (QPP, Employment Insurance, QPIP).
Why is my raise taxed so heavily?
Because it stacks on top of your income, at your marginal rate: the highest rate that applies to your last dollars earned. At $60,000, that marginal tax rate is around 36%, on top of which social contributions apply.
Is a bonus taxed like a raise?
Yes. A bonus adds to your income for the year and is taxed at your marginal rate, exactly like a salary raise. The withholding on the payment can look heavier, but it all evens out when you file your tax return.
Can a raise ever leave me worse off?
No. Since only the slice of income above a threshold is taxed more heavily, earning more always leaves you with more net pay. You simply keep a smaller share of the increase, never less than your previous salary.