2026 severance withholding
Severance Pay Tax Calculator
Estimate how much of your severance package you will actually receive after federal supplemental withholding, state income tax, and FICA.
Employer grossing up your severance? Use the Gross-Up Calculator →
Comparing a signing bonus? Try the Signing Bonus Calculator →
Frequently Asked Questions
How is severance pay taxed?
Severance pay is treated as supplemental wages for withholding purposes. Employers typically withhold federal tax at a flat 22% rate (37% on cumulative supplemental wages over $1 million in the year), plus state income tax and FICA.
Is severance pay taxed at a higher rate?
No — severance uses the same 22% federal supplemental withholding rate as bonuses and RSU vesting. The flat rate is often higher than your regular paycheck withholding, which creates the common misconception that severance is taxed at a special higher rate.
Can I reduce taxes on severance?
You cannot defer severance tax at withholding time, but you can plan for the balance due at filing. If your employer offers to gross up your severance, use the ExactTakeHome gross-up calculator to find the gross amount needed for your target net.
Data Sources & Methodology
ExactTakeHome tax data is sourced from official government publications and verified against primary sources. Last verified: .
- Federal withholding: IRS Publication 15-T — Federal Income Tax Withholding Methods
- Social Security wage base: SSA 2026 Social Security Wage Base
- Medicare rates: IRS Topic No. 751 — Social Security and Medicare Withholding Rates
- State income tax: California Franchise Tax Board — 2026 California Employer's Withholding Schedules
How severance withholding works
Severance is ordinary W-2 income. Most employers withhold using the federal supplemental wage flat rate of 22% — the same method used for bonuses and RSU vesting. State withholding and FICA also apply on the payment date.