How to use the severance pay tax calculator
- 1 Enter the severance pay.
- 2 Enter your other wages this year, including from the employer paying the severance.
- 3 Choose your filing status.
- 4 Enter your state tax rate and read your net check and real tax.
Worked example
A single filer with $120,000 of other wages receiving $30,000 of severance, with a 5% state tax. Withholding is $6,600 federal (22%), $1,860 Social Security, $435 Medicare and $1,500 state, so the net check is $19,605. The severance pushes income into the 24% bracket, so the real federal tax is $7,164: expect to owe about $564 more when you file.
Making the most of severance
- Ask about 401(k) contributions from the severance.
- Check the 22% withholding against your bracket.
- Apply for unemployment right away.
- Keep health coverage with COBRA or the Marketplace.
Check the rest of your pay with the Paycheck Calculator, bonus withholding with the Bonus Tax Calculator, and build a cushion with the Emergency Fund Calculator.
Features
Every withholding
22% federal, Social Security, Medicare and state.
Real tax
Works out the extra tax at your bracket for the year.
Refund or bill
Shows whether 22% is enough.
When to use it
Laid off this year
Check the rest of your pay with the Paycheck Calculator.
Planning the year
See your bracket with the Tax Bracket Calculator.
Building a cushion
Put severance toward an emergency fund with the Emergency Fund Calculator.
Retirement accounts
Avoid cashing out your plan. See the cost with the 401(k) Early Withdrawal Calculator.
Related Pay and Salary tasks
Frequently asked questions
How is severance pay taxed?
Severance is wages, so it is subject to federal income tax, Social Security, Medicare and state income tax. It is usually withheld as supplemental wages at a flat 22% federal rate.
Why is so much taken out of my severance check?
Federal 22%, Social Security 6.2%, Medicare 1.45% and state tax add up quickly, often 30% to 40% of the check. In the example, $10,395 of $30,000 is withheld.
Is the 22% withholding my real tax rate?
No. It is only a withholding rate. Your real tax depends on your total income for the year. If the severance falls in the 24% bracket or higher, you may owe more; if your income is lower, you may get money back.
What is the withholding on severance over $1 million?
Federal law requires 37% withholding on supplemental wages above $1 million in a year.
Can I reduce tax on severance?
You may be able to put part of it into your 401(k) if it is paid while you are still on payroll, contribute to an HSA, or ask to spread payments into the next year if your income will be lower then.
Does severance affect unemployment benefits?
It depends on the state. Some reduce or delay benefits while severance is paid; others do not count lump-sum severance. Apply right away and report the severance.
Is severance subject to Social Security tax?
Yes, up to the yearly wage base ($184,500 in 2026), counting your other wages for the year.
Is a payment for a legal claim taxed the same way?
Settlements for lost wages are taxed as wages. Payments for physical injury may be tax-free. Emotional distress payments are usually taxable.
Should I take severance as a lump sum or in installments?
A lump sum gives you the cash now; installments can spread income across tax years and may keep benefits running. Consider your bracket this year and next.
Does this include state tax exactly?
It uses the flat rate you enter. Some states have their own supplemental withholding rate.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Built and reviewed by Hamza Farooq, founder and lead developer
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