Are FICA Social Security and Medicare taxes deducted from severance pay?

Yes. The Supreme Court confirmed (in United States v. Quality Stores) that severance payments are taxable wages subject to Social Security (6.2%) and Medicare (1.45%) taxes.

Can I roll my severance pay into a 401(k) or IRA?

You cannot roll over severance pay directly into an IRA. However, if your employer allows 401(k) payroll deductions from your final severance check, you can contribute up to the annual 401(k) elective deferral limit ($23,500) pre-tax.

USAUpdated for 2026Taxes

US Severance Pay & Separation Package Tax Calculator 2026

Calculate net payout on employment severance packages, statutory 22% supplemental federal income tax withholding, FICA payroll taxes (6.2% Social Security + 1.45% Medicare), and state tax deductions.

Salaries & Monthly Wages Taxes & Duties Income Tax & Brackets

Calculated Result

Net Severance Payout (Take-Home Check)

$22,872.5

Calculator Inputs

Gross Severance Package Amount

Quick select:

Year-to-Date Earnings Prior to Severance (FICA Cap Check)

Quick select:

State Supplemental Tax Withholding Rate (%)

Quick select:

Net Severance Payout (Take-Home Check)

$22,872.5

Total Taxes Withheld (Fed + FICA + State)

$12,127.5

Federal Supplemental Income Tax (22%)

$7,700

FICA Social Security (6.2%)

$2,170

FICA Medicare (1.45%)

$507.5

State Income Tax Withholding

$1,750

The IRS treats severance pay as supplemental wages subject to mandatory flat 22% federal withholding (37% on amounts over $1 million), in addition to full FICA taxes.

This calculator is a mathematical model for general financial estimation, planning, and educational guidance. Results depend on your inputs and standard formulas, and do not constitute binding financial, tax, or investment advice. Always consult a qualified professional before making financial decisions.

Official Statute: Internal Revenue Code (26 U.S.C. § 3402(j) - Supplemental Wage Withholding & FICA Taxation of Severance Packages)Last Verified: 2026-09-04

Calculation Methodology

Federal Withholding = Severance Amount * 22% (or 37% over $1M). FICA Social Security = min($168,600 cap, Severance) * 6.2%. Medicare = Severance * 1.45%. Net Payout = Gross Severance - Fed Tax - FICA - State Tax.

Frequently Asked Questions

Employers must withhold federal income tax at a mandatory flat supplemental wage rate of 22% for payments up to $1 million (and 37% for amounts over $1 million), plus standard FICA and state taxes. Your actual final tax liability is reconciled on Form 1040.

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US Severance Pay & Separation Package Tax Calculator 2026

Calculator Inputs

Calculation Methodology

Frequently Asked Questions

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