Severance Pay Calculator
Weeks of pay, PTO payout, COBRA and the tax on severance in 2026
A severance pay calculator multiplies your weekly pay by the weeks your employer's formula grants: years of service × weeks per year, held between the plan's minimum and maximum. At a $78,000 salary ($1,500 a week), 8 years at 2 weeks per year is 16 weeks, or $24,000. In 2026 that is a supplemental wage: after the flat 22% federal rate and 7.65% Social Security and Medicare, $16,884 is left before state tax. No federal law requires severance; your plan or agreement sets it.
Last updated October 2026
Method: Severance = weeks × weekly pay, with weeks = base weeks + years of service × weeks per year, kept between your minimum and maximum. Withholding follows the 2026 supplemental wage rules in IRS Publication 15 (22% flat, 37% above $1 million) or the aggregate method with the Publication 15-T tables, plus FICA. The tax estimate uses the 2026 brackets and standard deduction from Rev. Proc. 2025-32.
Included: Salary or hourly pay, partial years, plan minimums and caps, PTO payout, other lump sums, employer-paid COBRA, flat versus aggregate withholding, a flat state rate and the likely refund or balance due.
Not included: Your plan's actual terms, itemized deductions and credits, state tax tables, unemployment offsets and equity awards. Estimates, not tax or legal advice.
📦 Your severance terms
Base pay only. Bonuses and commissions usually do not count unless your plan says so.
Enter 0 for no minimum or no maximum. Your severance plan or offer letter states the actual formula.
Paid at one fifth of a week of pay per day.
Prorated bonus, retention or pay in lieu of notice.
Example figure. Use the premium on your COBRA election notice.
🧾 Tax settings (tax year 2026)
Before the severance. Sets the Social Security wage base and Medicare thresholds.
New job, spouse's wages if filing jointly, unemployment benefits.
Use your state's supplemental rate, or 0 if your state has no wage tax.
📦 Estimated severance pay
🧮 How your severance adds up
- 1. Service counted: 8 years.
- 2. Formula: 0 base weeks + 8 × 2 weeks = 16 weeks.
- 3. Plan limits: the formula result stands.
- 4. Weekly pay: $78,000.00 ÷ 52 = $1,500.00.
- 5. Severance pay: 16 × $1,500.00 = $24,000.00.
- 6. PTO payout: 10 days × $300.00 = $3,000.00.
💵 Withholding on your severance
| Line | Amount |
|---|---|
| Severance, PTO and other cash (supplemental wages) | $27,000.00 |
| Federal income tax (22% flat rate) | −$5,940.00 |
| Social Security, 6.2% | −$1,674.00 |
| Medicare, 1.45% | −$391.50 |
| Cash after withholding | $18,994.50 |
| Employer-paid COBRA, 3 months (not taxable) | +$2,100.00 |
| Total package value | $29,100.00 |
🔍 Withholding vs. the tax you will owe
| 2026 federal income tax | Without severance | With severance |
|---|---|---|
| Wages and other income | $58,500.00 | $85,500.00 |
| Taxable after the $16,100.00 standard deduction | $42,400.00 | $69,400.00 |
| Income tax (2026 brackets) | $4,840.00 | $9,980.00 |
| Top bracket reached | 12% | 22% |
Assumes the withholding on your other income matched the tax on it, the standard deduction, and no credits.
📊 Your severance at 1, 2 and 3 weeks per year
| Formula | Weeks | Severance pay |
|---|---|---|
| 1 week per year | 8 | $12,000.00 |
| 2 weeks per year | 16 | $24,000.00 |
| 3 weeks per year | 24 | $36,000.00 |
Uses your service, base weeks and plan limits. No federal law sets a severance formula.
Severance pay: how much you get and how it is taxed in 2026
Three questions decide what a severance package is worth: how many weeks of pay the formula grants, what rides along with it, and how much is withheld now and owed at filing.
Is severance pay required by law?
No. The U.S. Department of Labor states that the Fair Labor Standards Act contains no severance requirement and that severance is a matter of agreement between employer and employee. It adds that severance is usually based on length of employment, and that its Employee Benefits Security Administration may help if an employer-sponsored severance plan does not pay.
The closest federal rule is the WARN Act. It generally covers employers with 100 or more employees and requires 60 calendar days of written notice before a plant closing or a mass layoff (50 to 499 workers who are at least 33% of a site's workforce, or 500 or more). An employer that skips the notice owes back pay and benefits for the period of the violation, up to 60 days. WARN does not preempt state laws, and some states add their own rules.
The severance pay formula
A weeks-per-year plan reduces to a few lines:
Weeks = base weeks + years of service × weeks per year Weeks are raised to the minimum and capped at the maximum Severance = weeks × weekly pay (salary ÷ 52) PTO payout = unused days × weekly pay ÷ 5 Some plans count only completed years, others prorate the extra months; the calculator does either. Gross severance at 1, 2 and 3 weeks per year, with no minimum or maximum:
| Salary, weeks per year | 2 years | 5 years | 10 years | 20 years |
|---|---|---|---|---|
| $50,000, 1 week | $1,923.08 | $4,807.69 | $9,615.38 | $19,230.77 |
| $50,000, 2 weeks | $3,846.15 | $9,615.38 | $19,230.77 | $38,461.54 |
| $50,000, 3 weeks | $5,769.23 | $14,423.08 | $28,846.15 | $57,692.31 |
| $75,000, 1 week | $2,884.62 | $7,211.54 | $14,423.08 | $28,846.15 |
| $75,000, 2 weeks | $5,769.23 | $14,423.08 | $28,846.15 | $57,692.31 |
| $75,000, 3 weeks | $8,653.85 | $21,634.62 | $43,269.23 | $86,538.46 |
| $100,000, 1 week | $3,846.15 | $9,615.38 | $19,230.77 | $38,461.54 |
| $100,000, 2 weeks | $7,692.31 | $19,230.77 | $38,461.54 | $76,923.08 |
| $100,000, 3 weeks | $11,538.46 | $28,846.15 | $57,692.31 | $115,384.62 |
| $150,000, 1 week | $5,769.23 | $14,423.08 | $28,846.15 | $57,692.31 |
| $150,000, 2 weeks | $11,538.46 | $28,846.15 | $57,692.31 | $115,384.62 |
| $150,000, 3 weeks | $17,307.69 | $43,269.23 | $86,538.46 | $173,076.92 |
Worked examples: a standard package and a capped one
Eight years at $78,000. Weekly pay is $1,500. At 2 weeks per year with a 4-week minimum and a 26-week maximum, 8 × 2 = 16 weeks, so severance is $24,000. Ten unused PTO days at $300 add $3,000, for $27,000 of supplemental wages. At the flat rate, $5,940 of federal income tax, $1,674 of Social Security and $391.50 of Medicare are withheld, leaving $18,994.50; three months of employer-paid COBRA at $700 bring the package to $29,100. The worker had earned $58,500 before leaving, so as a single filer with no other income, 2026 federal tax rises from $4,840 to $9,980. That extra $5,140 is $800 less than was withheld, which comes back at filing.
Twenty-two years at $160,000. At 3 weeks per year the formula gives 66 weeks, but the plan caps it at 52, so severance is $160,000. Fifteen PTO days at $615.38 add $9,230.77, for $169,230.77. With $120,000 already paid, only $64,500 is left under the wage base, so Social Security is $3,999.00; Medicare is $2,453.85 and Additional Medicare on the $89,230.77 above $200,000 is $803.08. After $37,230.77 of flat federal withholding, $124,744.07 is left. For a single filer, taxable income jumps from $103,900 to $273,130.77, into the 35% bracket: the severance adds $46,795.02 of tax, $9,564.25 more than was withheld. Filing jointly with no other income, it adds $36,843.38, so $387.39 comes back, plus $450 of Additional Medicare on Form 8959.
How severance is taxed in 2026
Severance is ordinary wages. IRS Publication 525 says you must include severance pay in income, and if you accept less severance in exchange for outplacement services, you still include the unreduced amount. Publication 15 lists severance among supplemental wages and makes it subject to Social Security, Medicare, income tax withholding and FUTA.
An employer that withheld income tax from your regular pay this year or last may withhold a flat 22% on supplemental pay up to $1 million; above that, 37% is mandatory. The aggregate method instead adds the severance to a regular paycheck, withholds on the total as if you earned it every pay period, and subtracts what the regular pay alone would carry. Federal withholding for a single filer earning $78,000:
| Severance | Flat 22% | Aggregate, biweekly pay | Aggregate, monthly pay |
|---|---|---|---|
| $10,000 | $2,200.00 | $2,811.70 | $2,327.00 |
| $25,000 | $5,500.00 | $8,116.55 | $7,258.69 |
| $50,000 | $11,000.00 | $17,366.55 | $16,044.19 |
The aggregate method withholds more on a large lump sum, most of all with biweekly pay, which is annualized 26 times. Neither method changes the tax you owe.
Withholding versus the tax you actually owe
That is why this severance tax calculator shows two numbers: what is withheld now and what the severance adds to your tax. Your return taxes severance at the bracket your total income reaches. The 2026 federal tax a $30,000 severance adds for a single filer, after the $16,100 standard deduction, against the $6,600 withheld at 22%:
| Other 2026 wages | Tax the severance adds | Share of severance | Versus $6,600 withheld |
|---|---|---|---|
| $20,000 | $3,430.00 | 11.43% | $3,170.00 back |
| $50,000 | $4,950.00 | 16.50% | $1,650.00 back |
| $90,000 | $6,600.00 | 22.00% | even |
| $150,000 | $7,200.00 | 24.00% | $600.00 due |
| $250,000 | $9,830.25 | 32.77% | $3,230.25 due |
A layoff early in the year tends to bring a refund; a large package on top of a full salary tends to bring a balance due. Additional Medicare is settled the same way on Form 8959, where joint filers have a $250,000 threshold.
PTO payout, COBRA and the rest of the package
A lump-sum payout of unused vacation is a supplemental wage under Publication 15, withheld like severance; whether it must be paid at all depends on state law and company policy. Prorated bonuses and pay in lieu of notice are wages too.
COBRA lets you keep your group health plan for up to 18 months after a job loss if your employer had 20 or more employees. You have at least 60 days to elect it, and the premium can reach 102% of the plan's cost. COBRA premiums your employer pays, directly or by reimbursing you, are tax-free under IRS Publication 15-B; a flat cash amount free to spend is wages. Losing job-based coverage also gives you 60 days to choose a Marketplace plan.
Severance and unemployment benefits
Whether severance delays unemployment benefits is a state question. The Labor Department's comparison of state unemployment insurance laws explains that many states treat wages in lieu of notice and dismissal payments as deductible income, which reduces or postpones benefits for the weeks they cover, while some treat dismissal pay as earned by past service and do not deduct it. Ask your state agency before filing. Unemployment benefits are taxable, and Form W-4V lets you request federal withholding on them.
How to use this calculator
- Enter your base pay as a salary, or an hourly rate and weekly hours.
- Enter years and months of service and whether partial years count.
- Set the formula from your plan: weeks per year, base weeks, minimum and maximum.
- Add PTO days, other lump sums and any COBRA months your employer pays.
- Choose the withholding method and filing status, then enter wages already paid, other expected income and a state rate.
It suits employees weighing an offer, HR teams budgeting a layoff and anyone checking a final pay stub.
What changes your severance
- Partial years. At 2 weeks per year, 8 years and 6 months is 17 weeks ($25,500 at $78,000) when prorated, 16 when only completed years count.
- Plan limits. A cap can cut a long-tenure package sharply, as with the 66 weeks capped at 52 above.
- What counts as pay: base salary only, or bonuses and commissions too.
- Timing. A January payment falls in a new tax year with a fresh wage base.
- Other income. A new job or a spouse's wages raise the bracket the severance lands in.
Tips before you sign
- Get the formula in writing, including how partial years and bonuses count.
- Use the review period. Workers 40 and older asked to waive age claims get at least 21 days (45 in a group layoff) and 7 days to revoke, under EEOC rules.
- Keep earned pay separate: final wages and benefits you are already owed should not depend on signing.
- Compare COBRA with a Marketplace plan before choosing.
- Plan for a balance due with extra withholding at your next job or an estimated payment.
Key terms
- Severance pay: pay at the end of employment beyond wages already earned.
- Supplemental wages: non-regular pay such as severance, bonuses and leave payouts.
- Flat rate method: 22% federal withholding on supplemental pay up to $1 million a year.
- Aggregate method: withholding on severance and a regular paycheck combined.
- WARN Act: the federal 60-day notice rule for covered plant closings and mass layoffs.
- COBRA: the right to continue group health coverage after leaving a job.
Limitations
The calculator applies the formula you enter, not your plan document, and treats state withholding as one flat rate. Its tax estimate uses the 2026 brackets and standard deduction without itemized deductions, credits, the tip and overtime deductions for 2025 through 2028 or state tax, and it assumes the withholding on your other income matched its tax. Equity vesting and deferred-compensation timing are not modeled.
Related calculators
- Gross up a payment to an exact net: Net to Gross Calculator.
- Withholding on a bonus: Bonus Tax Calculator.
- Take-home pay at a new job: Paycheck Calculator.
- Covering a balance due through your W-4: Tax Withholding Calculator.
- Social Security and Medicare alone: FICA Tax Calculator.
- How long the money lasts: Emergency Fund Calculator.
Sources
- U.S. Department of Labor: Severance Pay; Notices for Plant Closings and Mass Layoffs (WARN).
- IRS: Publication 15 (2026); Publication 15-T (2026); Publication 15-B (2026); Publication 525.
- IRS: Rev. Proc. 2025-32 (2026 brackets and standard deduction); Topic 418, Unemployment compensation.
- Social Security Administration: Contribution and Benefit Base ($184,500 for 2026).
- U.S. Department of Labor: A Worker's Guide to Health Benefits Under COBRA; Comparison of State Unemployment Insurance Laws.
- EEOC: Understanding Waivers of Discrimination Claims in Employee Severance Agreements.
⚠️ Common mistakes & edge cases
Reading the 22% as your tax rate
The flat rate is withholding. Your return taxes severance at your own bracket, from 10% to 37%, so the same check can mean a refund for one person and a bill for another.
Being surprised by a lump sum added to a paycheck
Under the aggregate method, $25,000 of severance on a $3,000 biweekly check had $8,116.55 withheld instead of $5,500. Any excess over your tax returns as a refund.
Forgetting Social Security and Medicare
Severance carries 7.65% FICA on top of income tax. Social Security stops once 2026 wages reach $184,500, so late-year packages for high earners lose less to it.
Treating a health stipend as tax-free COBRA
Only premiums the employer pays or reimburses are excluded. A flat cash amount you may spend on anything is taxed like the rest of the severance.
Skipping the unemployment claim
Some states postpone benefits while severance lasts and others ignore it. Ask your state agency instead of assuming severance disqualifies you.
Signing before checking the numbers
Workers 40 and older get at least 21 days to review a release of age claims. Use them to confirm the weeks, the pay base and the tax.
❓ Frequently asked questions
How much severance pay should I expect?
There is no standard amount. Severance is a matter of agreement between employer and employee, and the U.S. Department of Labor notes that it is usually based on length of employment. If your plan pays weeks of base pay per year of service, a $78,000 salary and 8 years give $12,000 at 1 week per year, $24,000 at 2 weeks and $36,000 at 3 weeks.
Is severance pay required by law?
No federal law requires it. The Fair Labor Standards Act has no severance requirement; severance is whatever your employer's plan or your agreement provides. The WARN Act is different: it requires covered employers to give 60 days' notice of certain plant closings and mass layoffs. If a severance plan does not pay as promised, the Labor Department's Employee Benefits Security Administration may help.
How is severance pay taxed in 2026?
Severance is wages, taxed as ordinary income. For withholding it is a supplemental wage, so your employer can withhold a flat 22% of federal income tax (37% on supplemental pay above $1 million in the year) or use the aggregate method. Social Security at 6.2% up to $184,500 of wages and Medicare at 1.45% apply too; state tax depends on your state.
Why was so much tax taken out of my severance check?
Two reasons. Social Security and Medicare add 7.65% to the 22% federal rate, about 29.65% before state tax. And if your employer added the severance to a regular paycheck (the aggregate method), that check was taxed as if you earned it every pay period: on a $3,000 biweekly salary, $25,000 of severance had $8,116.55 withheld instead of $5,500.00.
Will I get some of my severance withholding back?
Possibly. Withholding is a prepayment, and the return taxes the severance at your actual bracket. After a mid-year layoff your total income may sit in the 12% or 22% bracket. With $58,500 of wages and $27,000 of severance and PTO, a single filer owes $5,140 on the severance, $800 less than the $5,940 withheld at 22%.
Can severance push me into a higher tax bracket?
Yes, though only the income above each threshold is taxed at the higher rate. A single filer with $120,000 of wages who receives $169,230.77 of severance and PTO moves from the 22% to the 35% bracket; the severance adds $46,795.02 of federal tax, $9,564.25 more than the flat 22% withheld.
Does severance affect unemployment benefits?
It depends on your state. The Labor Department's comparison of state unemployment laws shows that many states treat dismissal or severance payments as income that reduces or postpones benefits, while others treat them as pay for past service. Ask your state agency before filing, and remember that unemployment benefits are taxable income too.
Is employer-paid COBRA part of severance taxable?
Generally no. IRS Publication 15-B applies the exclusion for employer health coverage to COBRA premiums an employer pays for a former employee, whether paid directly or reimbursed. A flat cash amount you can spend freely is wages. COBRA can cost up to 102% of the plan's cost and lasts up to 18 months after a job loss.
How is unused vacation pay taxed when I leave?
A lump-sum payout of unused vacation is wages. IRS Publication 15 treats vacation pay paid on top of regular wages, such as a lump-sum payment for unused vacation leave, as a supplemental wage, so it can be withheld like severance, at 22% plus Social Security and Medicare. Whether unused PTO must be paid out at all depends on state law and your employer's policy.
Should I sign a severance agreement right away?
Read it first and check the deadlines. If you are 40 or older and the agreement waives age discrimination claims, the EEOC says you must get at least 21 days to consider it (45 days in a group layoff), seven days to revoke after signing, written advice to consult an attorney and payment beyond what you are already entitled to.
💡 Good to know
Each year at 2 weeks is 3.85% of a year's pay
Two weeks is 2 ÷ 52 of a salary, so 10 years equal 38.46% of a year's base pay before any minimum or cap.
Withholding is a deposit, not the bill
What severance really costs in tax depends on everything else you earn that year, including a new job or a spouse's income.
Employer-paid COBRA is worth more than its face value
Three months at $700 is $2,100 of tax-free coverage. Netting the same $2,100 from cash severance at 29.65% withholding would take $2,985.07.