Estimate severance pay and net after-tax amount.
Net after-tax severance
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Gross severance
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Total tax withheld
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Your breakdown
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How a severance check actually lands in your bank account
Severance is not a gift, and it is not "free money" the way a lot of laid-off workers assume on day one. The IRS treats it as wages. That means the same payroll machinery that ran on every paycheck still applies: federal income tax, Social Security, Medicare, and whatever your state takes. The single biggest surprise people hit is that a lump-sum severance is usually taxed as a supplemental wage, and the federal default is a flat 22% withholding rate, not your normal paycheck rate. This calculator builds the estimate exactly that way so the number you see is the number that hits your account.
Pinning down the package size first
Before any tax comes off, the tool figures out how many weeks of pay you are owed. It converts your annual salary to a weekly figure by dividing by 52, then multiplies by your total weeks. Total weeks is years of service times weeks-per-year, plus any flat base weeks you negotiated. The common market norm for non-union, non-executive roles is one to two weeks per year of service. During the 2022 to 2024 tech layoffs, many packages stacked a flat base (often 12 to 16 weeks) on top of a per-year amount, which is why the "base weeks" field exists. Senior leaders frequently negotiate four to twelve weeks per year, sometimes with accelerated equity vesting on top.
A five-year tenure at a $120,000 salary
Say you earn $120,000, you have five years in, and your package pays two weeks per year with no flat base. Your weekly pay is $120,000 divided by 52, or about $2,308. Five years at two weeks each is ten weeks, so gross severance is roughly $23,077. Now the withholding: federal supplemental at 22%, FICA at the combined 7.65% (6.2% Social Security plus 1.45% Medicare), and a 5% state marginal rate in this example. Here is the full breakdown the calculator produces.
That is a 35% haircut on the gross. The chart below shows how the $23,077 splits into your take-home and the three tax slices.
The withholding versus owed gap people forget
That 22% is a withholding rate, not your final tax bill. If your total income for the year, including the severance, lands you in the 24%, 32%, or 35% bracket, you may owe more come April. The reverse is also true: if you are laid off mid-year and your annual income drops, you might have over-withheld and get some back. The calculator's FICA line is a flat 7.65% on the whole amount. In reality, Social Security stops once your year-to-date wages cross the annual wage base set by the SSA, so high earners who already maxed out their Social Security tax that year would not owe the 6.2% piece again. The tool keeps it simple and applies the full rate, which is the conservative assumption for most people.
Common questions about severance taxes
Can I lower the tax by spreading payments across two years?
Sometimes. Splitting a large package so part lands in January of the following year can keep you in a lower bracket each year, especially if you are unemployed for several months. This is a negotiable term, not something you control after signing. Ask before you accept the offer, and get it in writing.
Does severance affect my unemployment benefits?
It depends on the state. Some states treat severance as disqualifying income and delay your unemployment start date until the severance period ends. Others ignore lump sums entirely. Check your state's rules before assuming you can collect both at once, and look at our unemployment benefits tool for the next step.
A few moves can make a real difference in what you walk away with, and they are easiest to make before you sign the agreement. Ask whether unused paid time off is being paid out separately, because that is ordinary wages on top of the severance and changes your total tax picture. Look closely at how health coverage is handled, since some packages extend employer-paid benefits for a period, which is worth real money compared with paying full COBRA premiums yourself. If equity, a bonus, or a 401(k) match is in play, the timing of your termination date can determine whether you keep it or forfeit it, so the calendar matters more than people expect. And remember that a severance agreement is a negotiation, not a take-it-or-leave-it form, especially if you are being asked to sign a release of legal claims. This calculator is built for the person who has just been handed an offer and needs a fast, realistic read on the after-tax number, so they can decide whether to accept, counter, or have an employment attorney look it over before they sign anything.