Annual Incremental Earnings Calculator
A raise is easiest to judge in two numbers at once: how many dollars a year it adds, and what percentage of your old pay that really is. The Annual Incremental Earnings Calculator below takes this year’s annual earnings and last year’s, and returns the increase both ways: $10,000 on a move from $70,000 to $80,000, which is a 14.29% rise worth $833.33 a month. The same word, incremental, has a second life in business finance, and the calculator’s Project mode covers it: the extra earnings a project or investment produces each year, after tax, with depreciation handled the textbook way.
Keep the two meanings separate in your head. The personal figure compares you with yourself a year ago; it is not a pay conversion and it is not a forecast. The project figure compares a business with the version of itself that skips the decision. Both are differences, which is the point of the word incremental: only what changed counts, and sunk costs and existing overhead stay out.
Personal figures are gross, before tax. Project figures are after tax at the rate you enter. The projection table repeats one constant annual figure: treat it as a baseline, not a forecast.
Quick Answer
Key takeaways
- The personal formula is a subtraction with a percentage attached: new minus old, divided by old. $10,000 is 20.00% on a $50,000 base and only 10.00% on a $100,000 base.
- Compare like with like: same basis (gross against gross), full years against full years. A part-year job change needs annualizing before the comparison means anything.
- In project analysis only the change counts. Revenue and costs that exist either way, and money already spent, are excluded by definition.
- Depreciation is not a cash cost but it is a tax shield: $10,000 of depreciation at a 25% rate adds $2,500 to the after-tax figure in the worked project.
The two formulas, kept apart
Salary mode is arithmetic anyone can check on a payslip. Project mode is the corporate-finance version, where tax and depreciation enter because a business keeps only what survives both.
The depreciation step confuses people because it appears twice. It is subtracted before tax because it reduces taxable income, then added back because no cash left the business. The net effect is a tax shield worth depreciation x tax rate. The IRS rules for what can be depreciated, and over how long, sit in Publication 946 on depreciation. Your two earnings figures for salary mode should be totals on the same basis; if last year’s pay arrived from several sources, the annual earned income calculator builds that total source by source.
Worked example 1: the raise, in dollars and percent
Salary mode above is pre-filled with this case, and these are the figures it returns.
| Figure | Value |
|---|---|
| Old annual earnings | $70,000.00 |
| New annual earnings | $80,000.00 |
| Annual incremental earnings | $10,000.00 |
| Percentage increase | 14.29% |
| Monthly equivalent | $833.33 |
The percentage is the negotiating number. Typical annual merit increases in US employer surveys run in the low single digits, and the Bureau of Labor Statistics tracks the broader movement of pay in its Employment Cost Index: a 14.29% jump is a job-change-sized move, not a merit-cycle raise, and it usually means the role, the employer, or the hours changed underneath the salary. The same $10,000 tells three different stories at three bases:
| Old earnings | New earnings | Increase | Percentage |
|---|---|---|---|
| $50,000 | $60,000 | $10,000 | 20.00% |
| $70,000 | $80,000 | $10,000 | 14.29% |
| $100,000 | $110,000 | $10,000 | 10.00% |
Freelancers and the self-employed use the same comparison on business income, where a rising percentage on a rising base is the signature of a practice that is actually growing; the business-side view of that growth is in the business growth percentage calculator. If the raise was backdated and arrears are owed, that separate calculation lives in the backdated salary increase calculator.
Worked example 2: a project, after tax, projected
Switch the mode picker to Project and the same calculator prices a business decision. The pre-filled case: a service line adding $500,000 of revenue a year.
| Input or result | Value |
|---|---|
| Incremental revenue | $500,000.00 |
| Incremental costs | $300,000.00 |
| Implementation cost (first year) | $20,000.00 |
| Pre-tax incremental earnings | $180,000.00 |
| After tax at 25% | $135,000.00 per year |
| Cumulative over 3 years at that figure | $405,000.00 |
Two honest labels belong on that table. First, the implementation cost is deducted in the first-year figure, and the projection then repeats the same after-tax annual amount, so treat the cumulative line as a baseline for comparison between projects, not a cash-flow forecast. Second, add $10,000 of yearly depreciation to the same case and the after-tax figure rises to $137,500, not falls: the depreciation shields $10,000 of income from the 25% tax, a $2,500 gain, while costing no cash. The Small Business Administration’s guide to managing business finances makes the same distinction between paper costs and cash costs when it walks through financial statements. A project that cannot clear zero after tax on these generous assumptions rarely improves when the assumptions get realistic, which is exactly what the test is for. When the decision in front of you is a salary negotiation rather than a project, the salary negotiation calculator prices the offer side of that conversation.
What to leave out, and the mistakes that follow
Incremental analysis fails in predictable ways, and all of them inflate the answer.
The mirror-image mistake is comparing unlike periods. A worker who changed jobs in July earned half a year at each salary; comparing the two calendar-year totals understates the raise, and annualizing the new salary first (rate or salary times the full year) is the fix. Raises that repeat yearly compound, and projecting that path is the job of the compound salary increase calculator, which applies a percentage year after year instead of scoring one finished year against another.
What competing calculators miss
We reviewed the top results for this exact keyword before rebuilding the page. The set splits into salary-only tools, project-only tools, and one tool with the formula wrong.
Winning move 1: both meanings, honestly separated. The salary-only competitor covers the personal comparison and stops; the strongest project-side competitor covers incremental profit and stops. Searchers use one phrase for both questions, so this page serves both in one tool with a mode picker, and says plainly which formula is running.
Winning move 2: the percentage and the monthly figure lead with the dollars. A bare $10,000 difference invites the wrong conclusion. Here every salary result carries its percentage against the old base and its monthly equivalent, because 20.00% and 10.00% are different events wearing the same dollar figure.
Winning move 3: depreciation done the textbook way, with the cumulative table. The wrong-formula competitor multiplies an increment by years and calls the total annual. This tool subtracts depreciation for tax, adds it back as non-cash, shows pre-tax next to after-tax, and tabulates the cumulative projection the project-side competitors describe but do not print.
One limit applies to every tool in this comparison, including this one: incremental figures are only as honest as the inputs. Revenue that would have arrived anyway, or a comparison year flattered by a one-off payment, will pass through the arithmetic untouched.
Frequently asked questions
The extra earnings produced in a year compared with a baseline. For a person, it is this year’s earnings minus last year’s: $80,000 against $70,000 is $10,000 of incremental earnings. For a business, it is the additional earnings a project or decision generates per year, measured after tax.
Subtract old earnings from new earnings, divide by the old earnings, and multiply by 100. ($80,000 – $70,000) / $70,000 x 100 = 14.29%. The percentage depends on the base: the same $10,000 is 20.00% on $50,000 and 10.00% on $100,000.
(Incremental revenue – incremental costs – implementation cost – depreciation) x (1 – tax rate) + depreciation. With $500,000 of revenue, $300,000 of costs, a $20,000 implementation cost, no depreciation, and a 25% tax rate, the result is $135,000 a year after tax.
No. Incremental analysis counts only what changes because of the decision. Money already spent is gone regardless of the choice, and overhead that continues either way is not caused by the project. Including either one understates the project’s true contribution.
Depreciation reduces taxable income but is not a cash payment. Subtracting it before tax captures the tax shield; adding it back restores the cash picture. The net benefit is depreciation times the tax rate: $10,000 of depreciation at 25% adds $2,500 to the after-tax result.
Profit measures the whole business or the whole paycheck. Incremental earnings measure only the change caused by one decision or one year. A profitable company can still reject a project with negative incremental earnings, and a well-paid worker can still have a year with zero incremental earnings.
For a project, positive after tax is the minimum bar, judged against the investment required: $135,000 a year on a $20,000 implementation cost pays back in under two months. For a salary, judge the percentage against typical merit increases in the low single digits: double-digit growth usually reflects a role or employer change.
No. The multi-year table repeats the same after-tax annual figure, so read it as a baseline for comparing projects, not a forecast. If revenue or costs will change year by year, rerun the tool with each year’s figures and compare the series.
Yes. Enter the lower figure as the new earnings and the tool reports a negative increment with a percentage decrease: $65,000 against $70,000 is -$5,000, a 7.14% decrease. A negative result is information, not an error: it is the number a budget or a job decision has to answer.
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References
- Internal Revenue Service, “Publication 946: How To Depreciate Property” – the depreciation rules behind the project formula’s tax shield. IRS: Publication 946, Depreciation. Accessed October 2026.
- US Bureau of Labor Statistics, “Employment Cost Index” – the benchmark series for how fast wages and salaries are actually rising. BLS: Employment Cost Index. Accessed October 2026.
- US Bureau of Labor Statistics, “Employer Costs for Employee Compensation” – total compensation context for judging a raise against employer cost. BLS: Employer Costs for Employee Compensation. Accessed October 2026.
- US Small Business Administration, “Manage Your Finances” – cash versus paper costs in business financial statements. SBA: Manage Your Finances. Accessed October 2026.
- US Small Business Administration, “Market Research and Competitive Analysis” – the demand checks that should sit behind incremental revenue estimates. SBA: Market Research and Competitive Analysis. Accessed October 2026.
- Internal Revenue Service, “Gig Economy Tax Center” – how freelance earnings growth is tracked and reported. IRS: Gig Economy Tax Center. Accessed October 2026.
- Internal Revenue Service, “Self-Employed Individuals Tax Center” – the earnings basis for self-employed readers comparing years. IRS: Self-Employed Individuals Tax Center. Accessed October 2026.
- US Department of Labor, Wage and Hour Division, “Fair Labor Standards Act” – the wage definitions behind gross annual earnings figures. DOL: Fair Labor Standards Act. Accessed October 2026.