Job separation · Supplemental wages
Severance Tax Calculator
Estimate severance take-home using 2026 supplemental wage withholding and payroll limits, then compare the federal amount withheld with simplified tax attributable to the payment.
Quick estimate
Estimate severance take-home and withholding
Estimated severance take-home
$18,315$11,685 for federal withholding, payroll tax, and selected-state taxTake-home
$18,315Federal withholding
$6,600Payroll tax
$2,295State estimate
$2,790Flat federal withholding is about $164 below the simplified estimated federal tax attributable to the payment.
Selected-state tax is an incremental liability estimate, not an employer withholding table. Severance allocations, benefits, deferred compensation, multi-state work, payment timing, local tax, and payroll calculations can change the result.
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How this calculator works
IRS Publication 15 lists severance pay as supplemental wages. When a separately identified payment qualifies for the percentage method, federal income tax withholding is generally 22% through $1 million of supplemental wages from the employer and 37% above that threshold.
Withholding is not final tax
The flat rate controls payroll withholding, not the tax bracket applied on the return. The calculator separately estimates incremental federal income tax from annual regular wages plus severance under 2026 brackets. A positive gap signals potential underwithholding in this simplified model.
Payroll taxes still apply
Severance is generally wage income. The employee Social Security rate is 6.2% up to the 2026 $184,500 wage base. Medicare is 1.45% without a wage cap, and employers withhold an additional 0.9% after wages they pay exceed $200,000.
Payment timing changes the result
A payment in January can fall in a different tax year from December wages, restart the Social Security wage base, and change annual bracket stacking. Installments can also affect benefits, unemployment, and state allocation.
COBRA subsidies, outplacement services, accrued leave, deferred compensation, release consideration, and legal-settlement allocations may not all follow one simple severance model.
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Worked example
A separate $30,000 severance payment below the $1 million supplemental threshold may have $6,600 of federal withholding at 22%.
Social Security depends on wages already paid during 2026, and the final return may tax the payment above or below 22% depending on total household income and deductions.
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Questions people ask
Is severance taxed like a bonus?
For federal withholding, severance is listed as supplemental wages and may use the same percentage or aggregate methods. Final income tax is based on the annual return.
Is severance subject to Social Security and Medicare?
Generally yes, as wage income, subject to applicable wage bases and limited exceptions.
Why did my employer withhold 22%?
That is the federal flat supplemental wage withholding rate through the applicable $1 million threshold, not necessarily your final marginal rate.
Can severance be paid in another tax year?
The agreement and payment date control. Timing can materially change brackets and payroll-tax limits, so confirm before assuming an election is available.
Does severance affect unemployment benefits?
Potentially, but rules are state-specific and depend on payment structure. This calculator does not estimate benefits eligibility.
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Sources and model basis
This calculator is for tax year 2026 — the return filed in early 2027. Rates, brackets, deductions and limits are the ones in force for 2026, including changes enacted during 2026 that apply retroactively to the whole year. It does not estimate any other year.
Published rules and formulas are linked below. Values supplied by the visitor remain scenario inputs, not factual claims.
- IRS Publication 15 (2026)Severance as supplemental wages, 22%/37% withholding, and payroll rules
- IRS Topic 7512026 Social Security wage base, Medicare, and Additional Medicare withholding
- IRS Publication 525Taxable compensation and severance-related income context