2026 tax year · laid off
Severance pay tax calculator
The 22% taken out of your severance is withholding, not your tax bill. Depending on your income it over- or under-shoots, here's the real number.
Severance is "supplemental wages," so an employer withholds a flat 22% for federal tax (37% on anything over $1 million) when it's paid separately. That flat rate ignores your actual bracket: it over-withholds if you're in the 10 to 22% range (refund at filing) and under-withholds if you're in the 32 to 37% range (a bill you should set aside for now). This shows the withholding and your estimated real liability side by side.
Counts toward the $184,500 Social Security cap.
Wages, new job, spouse, sets your real tax rate.
Nothing you enter is stored or sent anywhere, it runs in your browser.
The same $40,000 severance, two incomes
Why "22% withheld" tells you almost nothing on its own, a single filer in California, $40,000 severance:
| Other 2026 income | Withheld (federal) | Actual liability | At filing |
|---|---|---|---|
| $20,000 | $8,800 | $9,485 | refund ≈ $5,015 |
| $400,000 | $8,800 | $21,463 | owe ≈ $6,963 more |
Same $40,000, same $8,800 withheld. But the low earner gets money back and the high earner owes thousands more. The withholding rate is fixed; your tax rate is not.
Questions
Is severance taxed at a higher rate?
No. It's withheld differently (a flat 22%), but it's taxed as ordinary income at your normal rates. The flat withholding just isn't your final tax, you settle up at filing. See the myth in the table above.
Does FICA come out of severance?
Yes, 6.2% Social Security up to the $184,500 wage base (wages already earned from the same employer this year count toward it) and 1.45% Medicare with no cap, plus 0.9% additional Medicare on wages over $200,000 ($250,000 married).
What if it's paid with my final paycheck?
Then the aggregate method applies instead of the flat 22%, the employer withholds as if the combined amount were regular wages, which usually lands much closer to your real rate. Pick that mode above to see it.
Next steps
- Health coverage COBRA vs the 2026 marketplace
- Unemployment your weekly benefit and duration
- Runway how long your money lasts
- Estimated tax penalty if you under-withheld
An estimate for the 2026 tax year on your own inputs. Nothing you enter is stored or sent anywhere. Not tax advice.