Severance Tax Calculator
Understand how federal and state taxes may impact your severance payout
How much of my severance will I actually keep after taxes?
Severance is taxed as supplemental wages. Employers commonly withhold federal income tax at the 22% flat rate (37% on amounts over $1 million), plus Social Security and Medicare (7.65%) and any state income tax. So a large lump sum often nets around 60–75% of the headline number.
Withholding isn't your final tax bill — a big payout can push part of your income into a higher bracket, and you reconcile it when you file. Estimate your net below, then see how far it stretches with the Layoff Runway Calculator.
- Estimated time
- 2–3 minutes
- Cost / impact
- Roughly 22% federal withholding + FICA + state tax
- What you need
- Severance amount, salary, filing status, state
Severance Tax Calculator
Estimate federal and state tax impact on severance
Who Should Use This Calculator?
Use this to understand your actual take-home severance after taxes:
- •You've received a severance offer and want to know net cash you'll receive
- •You're planning your financial runway and need an accurate severance figure
- •You're comparing severance offers and want to know the real value
- •You want to understand tax implications before accepting severance
What Severance Package Items Are Taxable?
Usually Taxable:
- • Severance payments (lump sum or installments)
- • Unused paid time off (PTO) payout
- • Unused sick time
- • Bonuses earned but not paid
- • Commission earned but not paid
- • Stock option proceeds
May Have Tax Benefits:
- • Health insurance continuation (COBRA) subsidies
- • Outplacement services (sometimes tax-free if under $5,250)
- • Employer contributions to qualified plans
Example Scenario
Scenario: Software engineer in California offered $60,000 severance
Federal tax (~22%): ~$13,200
State tax (CA 9.3%): ~$5,580
Net severance: $60,000 - $18,780 = $41,220
You keep about 69% of the gross severance. The actual amount depends on your overall income, deductions, and state tax law.
Related Tools & Guides
Frequently Asked Questions
Is severance subject to FICA taxes?+
Should severance be withheld as a lump sum or spread over time?+
Can I negotiate for net severance instead of gross?+
What are my options if I can't afford the tax bill?+
How do I account for severance on my tax return?+
Is this calculator accurate for my situation?+
Important Disclaimer
This calculator provides simplified educational estimates only and is not tax advice. Severance, unemployment, PTO, sick time, and other compensation may all be taxable depending on your specific situation, state law, and federal law. Your actual tax liability may be higher or lower. Consult a CPA, tax professional, or the IRS (irs.gov) for personalized tax guidance before filing your return.
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Deepak Middha is the founder of LayoffNext and a Chartered Accountant (ICAI, India). A U.S. immigrant with nearly 20 years of experience — and 17 years in hedge fund and private equity administration, including as Vice President of Fund Accounting at NAV Fund Administration Group and Associate Director of Private Equity and Real Estate at SS&C Technologies — he builds free, plain-language layoff tools and guides for employees, H-1B workers, and immigrant families.