See how much of your severance package you keep after federal supplemental tax, FICA, and state tax.
Yes. Severance pay is fully taxable as ordinary income. Employers treat it as supplemental wages and typically withhold a flat 22% federal (37% above $1 million), plus Social Security, Medicare, and state tax. It's reported on your W-2.
As wages. Federal withholding uses either the 22% flat supplemental rate or the aggregate method (added to your regular pay). FICA (7.65%) and state income tax also apply. Your final tax is settled at filing based on total annual income.
The flat 22% federal supplemental withholding plus FICA and state tax can take 30-40% of a severance check. If your marginal rate is below 22%, you get the difference back at filing.
Options include contributing to a traditional 401(k)/IRA to lower taxable income, spreading payments across two tax years if the employer allows, or timing it in a lower-income year. Consult a tax professional for large severance packages.
Estimates for 2026 using IRS supplemental wage rules and FICA. Withholding shown is not final tax — actual liability is settled at filing. Not tax advice.
Tax calculations are estimates for educational and informational purposes only. This site does not provide tax, legal, or financial advice. Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. Data sourced from IRS publications and official state tax authority websites.
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