How to use the severance pay calculator
- Enter weekly pay and years of service.
- Enter the weeks per year your offer uses, and any extra fixed weeks.
- Add a leave payout and your state withholding rate, if any.
- Add wages already paid this year so Social Security and Medicare caps are right.
- Read take-home. This is an estimate; compare it with the offer letter.
How the number is built
Gross severance here is weekly pay times weeks of severance, plus any unused leave paid out. Weeks of severance is years of service times the weeks per year your package gives, plus any extra fixed weeks. Five years at two weeks a year on $1,500 a week is 10 weeks and $15,000. You choose every input. There is no federal law that sets a severance amount in this tool, and your own agreement, contract or company policy decides it. A common convention is one to two weeks per year of service, but it is a rule of thumb, not a standard, so use your offer letter.
Federal tax on severance
The IRS says severance payments are wages subject to Social Security and Medicare tax, federal income tax withholding and FUTA. Publication 15 (2026) lists severance pay among supplemental wages. When an employer pays supplemental wages separately and used regular withholding for the employee, it can withhold a flat 22% with no other percentage allowed, and 37% on the part that takes total supplemental wages in the year above $1,000,000. This severance pay calculator uses that flat method. Your employer may instead combine the payment with regular pay, which can withhold more or less. The flat percentage is withholding, not your final tax: any difference settles on your return.
Worked example
Pay is $2,000 a week, service is 8 years at 2 weeks, plus 4 extra weeks, and there is a $3,200 leave payout. Weeks: 8 x 2 + 4 = 20. Gross: $40,000 + $3,200 = $43,200. Federal 22%: $9,504.00. Social Security 6.2% on $43,200 (wages so far $60,000, under the cap): $2,678.40. Medicare: $626.40. State at 4.5%: $1,944.00. Take-home: $28,447.20, which is 65.85% of gross.
Before you accept an offer
- Check how the weeks are paid: as a lump sum or as continued salary. Installments are taxed as regular wages in each pay period.
- Ask whether health coverage continues and for how long; this page does not value benefits.
- A release of legal claims is often a condition. This is general information, not legal or tax advice. Talk to an employment lawyer or tax adviser about your own agreement.
Method and sources
Supplemental wage rules, the 22% and 37% rates and the statement that severance is subject to Social Security, Medicare, federal income tax withholding and FUTA: IRS Publication 15 (2026), Circular E, sections 7 and Reminders, read on 2026-11-04. Social Security base $184,500 for 2026 and the 0.9% Additional Medicare Tax over $200,000 follow the paycheck engine on this site (SSA announcement; IRC 3101). Weeks-per-year formulas are unsourced conventions chosen by you. Constants to refresh each year: withholding rates, wage base.
Worked examples
| Example | Input | Result |
|---|---|---|
| 5 years at 2 weeks per year | Weekly base pay ($): 1500; Years of service: 5; Weeks of pay per year of service: 2; Extra fixed weeks of pay: 0; Unused leave payout ($): 0; Wages already paid this year ($): 0; Other supplemental wages paid this year ($): 0; State income tax withholding (%): 0 | Weeks of severance: 10; Gross severance: $15,000.00; Federal income tax (flat supplemental rate): $3,300.00; Social Security (6.2%): $930.00; Medicare (1.45%): $217.50; State income tax withholding: $0.00; Estimated take-home severance: $10,552.50; Share kept: 70.35% |
| 8 years, extra weeks, leave payout, 4.5% state | Weekly base pay ($): 2000; Years of service: 8; Weeks of pay per year of service: 2; Extra fixed weeks of pay: 4; Unused leave payout ($): 3200; Wages already paid this year ($): 60000; Other supplemental wages paid this year ($): 0; State income tax withholding (%): 4.5 | Weeks of severance: 20; Gross severance: $43,200.00; Federal income tax (flat supplemental rate): $9,504.00; Social Security (6.2%): $2,678.40; Medicare (1.45%): $626.40; State income tax withholding: $1,944.00; Estimated take-home severance: $28,447.20; Share kept: 65.85% |
| 12 years at 1 week, near the Social Security cap | Weekly base pay ($): 3000; Years of service: 12; Weeks of pay per year of service: 1; Extra fixed weeks of pay: 0; Unused leave payout ($): 0; Wages already paid this year ($): 180000; Other supplemental wages paid this year ($): 0; State income tax withholding (%): 9.3 | Weeks of severance: 12; Gross severance: $36,000.00; Federal income tax (flat supplemental rate): $7,920.00; Social Security (6.2%): $279.00; Medicare (1.45%): $666.00; State income tax withholding: $3,348.00; Estimated take-home severance: $23,787.00; Share kept: 66.08% |
FAQ
How much severance pay should I get?
There is no federal formula in this tool; it follows your agreement or policy. One to two weeks per year of service is a common convention, but it is not a legal standard.
Is severance pay taxed more than regular pay?
Federal income tax is often withheld at a flat 22% when paid separately, which can be more or less than regular withholding. Your actual tax is settled on your return.
Is severance subject to Social Security and Medicare?
Yes. IRS Publication 15 says severance payments are wages subject to Social Security and Medicare tax.
Is a lump sum better than installments?
It depends on your tax position and benefits. Installments are withheld like regular wages each pay period; this page models a lump sum.
Does this include unemployment benefits or health coverage?
No. It values only pay and leave payout and does not value benefits.
Is this legal advice?
No. It is an estimate of money. Questions about your rights or a release should go to an employment lawyer.
Social Security, Medicare and state tax
Social Security is 6.2% until your wages for the year reach the $184,500 base, so someone who has already earned $180,000 pays it on only $4,500 of severance. Medicare is 1.45% on everything, plus 0.9% on wages above $200,000. State withholding varies, so the tool takes your state's percentage; use the paycheck calculator for your state to find it.