Severance Pay Calculator: What You Actually Take Home
Estimate what you keep from a severance package after the 22% federal supplemental withholding, FICA, and state tax. See your likely refund at filing.
Severance Pay Calculator: What You Actually Take Home
Your severance
Enter the package and the salary you were on, then pick your state, filing status, and withholding method.
Severance paid on a separate check, withheld at a flat 22% federally.
Advanced
Leave blank and we assume a full year of your salary.
Set this to 0 if the severance is your last paycheck of the year. This is what usually turns the 22% into a refund.
Used to apply the $1M / 37% federal cap mid-year.
2026 estimate of employer withholding, not tax advice. Withholding is a prepayment, not the final tax you owe. State rates marked "estimated" approximate states without a published supplemental rate; local city taxes, 401(k) and benefit deductions, and unemployment benefits are not modeled.
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How severance pay is taxed: supplemental wages, not a special rate
Severance is ordinary taxable wages. It lands on your W-2 next to your salary, and it is taxed at your regular rates when you file. The only thing that makes it feel different is the withholding: the IRS classifies severance as "supplemental wages," which governs how your employer takes money out of the check, not how much you actually owe for the year.
Two federal methods are allowed. The percentage method applies a flat 22% to the severance when it is paid on its own, with a mandatory 37% on any portion above $1,000,000 of supplemental wages for the year. The aggregate method stacks the severance onto a regular paycheck and withholds on the combined amount at your W-4 rate. Your employer picks; you can model both above. Either way, what comes out of the check is a prepayment, not the final bill.
The four layers that come out of a severance check
Federal supplemental withholding is the first and biggest layer. Social Security is the second, at 6.2%, but only on wages up to the 2026 wage base of $184,500. That cap matters more for severance than for a normal paycheck: if the salary you already earned this year passed $184,500, the Social Security line on your severance is $0, and if the severance straddles the base, only the portion below it is charged.
Medicare is the third layer, 1.45% on every dollar with no cap, plus a 0.9% Additional Medicare surtax on wages above $200,000 (single or head of household), $250,000 (married filing jointly), or $125,000 (married filing separately). State supplemental withholding is the fourth. California takes 6.6% on severance (its 10.23% rate is for bonuses and stock options) and New York takes 11.7%. Nine states take nothing from wages at all. The rest either publish a supplemental rate or get estimated here from their flat or top ordinary rate, and the calculator flags which is which.
Why a layoff usually means over-withholding, and a refund
Withholding is calibrated to a year of steady pay. A layoff ends the pay but not the withholding rate, so the flat 22% keeps assuming an income you no longer have. Take a single filer on $85,000 who is laid off mid-year with a $25,000 severance and no other wage income for the rest of the year. Roughly $42,500 of salary plus the severance puts their real federal rate for the year well under 22%, so a meaningful slice of the federal withholding comes back at filing.
Two fields under Advanced drive that estimate. Put your actual wages so far this year in "wages already earned this year" (left blank, the calculator assumes a full year of salary), then set "other wages you expect for the rest of this year" to 0 if the severance is your last wage income. Fill in a new job at a similar salary instead and the effect largely disappears, because your income for the year lands back where the withholding assumed it would. The filing estimate runs the severance through the brackets stacked on the income you actually expect, rather than applying one flat marginal rate, since a large package often straddles two or three brackets.
Lump sum vs. salary continuation
The total tax is the same; only the timing moves. A lump sum is one withholding event, entirely inside one tax year, with one bite at the Social Security wage base. Salary continuation spreads the withholding across your normal pay schedule and can split the income across two tax years, which sometimes keeps you out of a higher bracket. The catch is January: a new year resets the Social Security wage base, so continuation payments can pull more 6.2% in total than a single lump sum would have.
Unemployment is the other difference, and it varies by state. California excludes a true lump-sum severance from wages, so it does not reduce your weekly benefit, while other states treat continuation payments as ongoing wages that offset or delay benefits. Check your state agency before counting on both. For the full picture across states, filing statuses, and 401(k) or HSA contributions, download the Stub44 Salary Calculator app. You can also compare this against the Bonus Tax Take-Home Calculator, see how stacked income behaves with the Second Job Take-Home Calculator, reset your withholding at a new job with the W-4 Withholding Planner, and check why 22% withheld is not 22% owed with the Marginal vs Effective Tax Rate Calculator.
Frequently Asked Questions
Common questions about severance pay calculator: what you actually take home
How is severance pay taxed?
Severance is taxable wages, reported on your W-2 like any paycheck. The IRS treats it as supplemental wages, which changes how your employer withholds, not what you ultimately owe. Most employers use the percentage method: a flat 22% federal withholding on severance up to $1,000,000 of supplemental wages for the year, and a mandatory 37% on anything above that. Social Security, Medicare, and state tax come out on top.
Why was 22% taken out of my severance?
That 22% is the IRS flat rate for supplemental wages, and it ignores your W-4 entirely. There is no such thing as a "severance tax rate," and 22% is almost certainly not your bracket. It is a prepayment. If your real rate for the year is lower (common after a layoff, because your income for the rest of the year drops), the difference comes back as a refund. Enter what you expect to earn for the rest of the year in the field above and the calculator shows you the gap.
Do I pay Social Security and Medicare on severance?
Yes. The Supreme Court settled this in United States v. Quality Stores (2014): severance is wages for FICA. Social Security is 6.2%, but only on earnings up to the 2026 wage base of $184,500, so if your salary already passed that, no Social Security comes out of the severance at all. Medicare is 1.45% on every dollar, plus a 0.9% Additional Medicare surtax on wages above $200,000 (single or head of household) or $250,000 (married filing jointly).
Will I get a refund on my severance withholding?
Often yes, and a bigger one than people expect. Withholding assumes the money keeps coming; a layoff means it usually does not. If the severance is your last wage income of the year, your actual bracket for the year can be well under 22%, and the excess returns at filing. The "likely refund or shortfall" line above compares what your employer withholds against the tax the severance really adds on top of the income you expect. High earners can land on the other side and owe a little. The Marginal vs Effective Tax Rate Calculator shows why the two numbers differ.
Is a lump sum or salary continuation better for taxes?
The total tax you owe is the same either way, because it is all wages. What changes is timing. A lump sum concentrates the withholding into one check and eats the Social Security wage base in a single year. Salary continuation spreads the withholding out, and if payments cross into January the Social Security wage base resets, so you can pay more in 6.2% tax overall. Continuation also smooths income across two tax years, which sometimes lowers your combined bill.
Does severance affect my unemployment benefits?
It depends on your state and the payout shape. Some states, California among them, exclude a true lump-sum severance from wages, so it doesn't reduce your weekly benefit. Others treat salary continuation as ongoing wages that offset or delay benefits week by week. This calculator does not model unemployment, so check your state's unemployment agency before you assume a continuation package is free money.
Is severance taxed differently from a bonus?
No. Both are supplemental wages under the same IRS rules, withheld the same way at the same 22% and 37% federal tiers. At the state level, California withholds less on severance (6.6%) than on a bonus (10.23%). The practical difference is context: a bonus usually arrives on top of a full year of salary, while severance often arrives as your income is ending, which is why severance is far more likely to be over-withheld. Compare the two with the Bonus Tax Take-Home Calculator.
Can I lower the tax on my severance?
You can't pick your employer's withholding method, but you do have some levers. If the package is paid before you leave, a final 401(k) or HSA contribution reduces the taxable amount. If you can negotiate a continuation schedule that straddles two tax years, that may keep you out of a higher bracket. And if you are being over-withheld, adjusting the W-4 at a new job (see the W-4 Withholding Planner) recovers the money during the year instead of at filing.