The optical band gap is a major selection criterion for an absorber in photocatalytic water splitting. Due to its ideal value hematite has been intensively investigated without reaching the expectation, yet. In this work, the Fermi level positions in hematite due to doping and contact formation are investigated. An upper boundary for the Fermi level position at 1.8 eV above the valence band maximum due to the formation of polarons is identified. This results in a different concept of the effective band gap for hematite which we believe is transferable to any material with competing polaron formation after optical excitation: the optical band gap of 2.2 eV deviates from an effective electronic band gap of 1.75 eV. The polaron state acts as a limit in (quasi-)Fermi level shift, restricting the potential of charge transfer reactions. Additionally, it has led to an incorrect determination of the band edge positions of hematite in electrochemical contacts.