Severance Pay Calculator
Losing a job is hard enough. Figuring out your final payout shouldn't be. Estimate your exact net take-home pay from a severance package, including PTO payouts, while accounting for the tricky 22% supplemental tax rate.
Updated for 2024–2025 IRS Supplemental Wage Regulations
Looking to structure your overall tax burden? See All Income Tax Tools
Enter your severance details
to calculate your final payout
How is Severance Actually Taxed?
The IRS views lump-sum severance pay not as a standard paycheck, but as "supplemental wages"—the exact same bucket they place bonuses, commissions, and retroactive pay.
By default, employers are legally required to withhold a flat 22% rate for federal taxes on supplemental wages (if under $1M). Because this is a flat rate, it completely ignores your standard W-4 allowances.
You cannot escape FICA! The government requires the standard 6.2% for Social Security and 1.45% for Medicare be withheld from severance pay the same way it is taken from every normal paycheck.
Lump Sum vs. Salary Continuation
When negotiating a severance package, deciding *how* the money is paid out can significantly change the immediate cash flow you have to bridge the gap until your next job.
Lump Sum Payout
- You receive all the money immediately.
- Clean break from the company right away.
- Tax Hit: Withheld at a flat 22% federal rate, which means a massive chunk is removed up-front.
- If 22% is too high based on your total annual earnings, you have to wait until tax season to get the refund.
Salary Continuation
- You remain "on payroll" and receive regular bi-weekly checks.
- Benefits (like health insurance) often continue during this period.
- Tax Hit: Taxed utilizing your standard W-4 withholding brackets, meaning your net pay is generally higher per dollar upfront.
What about my unused PTO?
Payouts for accrued but unused vacation time or PTO are treated identically to severance—as supplemental income. Whether it is rolled into your final severance check or paid directly upon termination, it faces the same 22% flat federal withholding rule.
Frequently Asked Questions
Share the Severance Estimator
Help others navigate layoffs or job transitions by sharing this free tool to estimate their financial runway.
Suggested hashtags: #Severance #Layoffs #Taxes #SalaryCalculator #TheCalcs