Severance Tax Calculator 2026 β Net Pay After Taxes
Calculate how much severance pay you'll actually keep after federal income tax, FICA, and state taxes. Compare flat vs aggregate withholding methods.
Severance Tax Breakdown
Withholding vs Actual Tax Comparison
This shows what your employer withholds vs what you actually owe. The difference becomes a refund or additional payment at tax time.
| Tax Item | Withheld (Flat 22%) | Withheld (Aggregate) | Actual Tax Owed |
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How Severance Pay Is Taxed
Severance pay is taxed as ordinary income β just like wages. It is subject to federal income tax, FICA (Social Security and Medicare), and state income tax. The IRS considers severance "supplemental wages," which allows for two withholding methods: a flat 22% or the aggregate method.
The flat 22% method is simple: your employer withholds exactly 22% for federal taxes (37% if severance exceeds $1 million). This may not match your actual marginal rate. If you're in the 24% or higher bracket, you'll owe additional tax when you file. If you're in the 12% bracket, you'll receive a refund.
The aggregate method treats your severance as if it were a regular paycheck, combined with your other wages. This often leads to higher withholding because it assumes the severance is earned at the highest rate. While more complex, it tends to be more accurate.
The Formula
SS Tax = min(Severance, max(0, $184,500 β Prior W-2 Wages)) Γ 6.2%
Medicare Tax = Severance Γ 1.45% (+ 0.9% if total wages exceed $200K)
Flat Withholding = Severance Γ 22% (or 37% above $1M)
Aggregate Withholding β (Combined tax β Regular withholding already paid)
Example
SS tax: Salary already used $120K of $184,500 cap. SS on severance: min($80K, $56,100) Γ 6.2% = $3,478
Medicare: $80,000 Γ 1.45% = $1,160
Federal marginal tax on $80K (added to $120K salary) at ~32β35% bracket: ~$27,200
State tax: $80,000 Γ 5% = $4,000
Total taxes: ~$35,838 | Net take-home: ~$44,162
Flat 22% withheld: $17,600 β under-withheld by ~$9,600 (owe at filing)
Lump Sum vs Installment Analysis
Compare total tax when taking severance all in one year vs split over two years
Should you take all your severance in one year or spread it over two? This analysis compares the total tax cost of each approach.
| Scenario | Year 1 Tax | Year 2 Tax | Total Tax | Net Severance | Savings vs Lump Sum |
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