Bonus vs Salary Increase Calculator
Compare the long-term financial value of a one-time bonus versus a permanent salary raise.
See which option benefits you more over 1, 3, 5, and 10 years.
When an employer offers either a one-time bonus or a permanent salary increase, it can be difficult to compare them fairly. They feel different in the moment, but what really matters is the total financial impact over time.
The Key Insight
A salary increase is permanent. It compounds year after year, and every future raise is calculated from the new, higher base. A bonus is a one-time payment that leaves your base pay exactly where it was.
Example Calculation
Suppose you earn $60,000 per year and your employer offers either:
- Option A: $5,000 one-time bonus
- Option B: $2,000 per year salary increase (3.3%)
Ignoring cost-of-living bumps for a moment, the raise stacks up like this:
| Year | With Bonus | With Raise (cumulative extra) |
|---|---|---|
| 1 | +$5,000 | +$2,000 |
| 2 | $0 extra | +$4,000 |
| 3 | $0 extra | +$6,000 |
| 5 | $0 extra | +$10,000 |
| 10 | $0 extra | +$20,000 |
By year 3 the raise has caught the bonus. By year 10 it is worth four times as much.
That table is the conservative version. The calculator above goes further and grows the raise 3% a year, on the assumption that your annual cost-of-living bump applies to the new higher base too. On the same numbers that pushes the 10-year figure from $20,000 to $22,928, and it can pull the break-even year forward when the bonus is large.
Tax Considerations
Bonuses are withheld as supplemental income at a flat 22% federal rate in the United States, on amounts under $1 million. That withholding is not the tax. At filing, a bonus and a raise of the same size are taxed identically, at your marginal rate. The bonus just feels worse in the moment because more was held back up front, and you get the difference back as a refund.
Enter your own marginal rate below and the calculator applies it to both options, which is what makes them comparable.
Additional Factors to Consider
- Retirement contributions: A higher salary increases your 401(k) base and employer match
- Benefits: Some employers calculate benefits (disability, life insurance) as a percentage of salary
- Future raise negotiation: A higher base salary gives you a stronger starting point for future raises
- Employment tenure: The benefit of a raise depends on how long you stay at the company
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
SuperGlobalCalculator is independently built and maintained. See how we build and verify our calculators.