Severance Ledger editorial desk
Tax & Withholding Desk
Federal & state severance tax and withholding
The Tax & Withholding Desk covers the tax mechanics of severance — how federal supplemental withholding (the 22% / 37% structure in IRS Publication 15-A), state supplemental rules, FICA, and state disability insurance (CA SDI, NJ TDI, NY DBL) interact on a payout.
This desk tracks state-by-state differences and maintains the publication's annual state severance-tax reference tables: California's 6.6% supplemental rule, New York's stacked state-plus-NYC withholding, the no-state-income-tax states (TX, FL, WA, NV, SD, TN, WY, AK, NH), and the reconciliation mechanics that determine what recipients actually owe at filing. Articles cite IRS publications and state revenue codes by section, and are refreshed each January as rates and limits change.
Severance Ledger does not provide tax advice. Readers should consult a CPA or tax attorney for guidance specific to their situation.
Editorial focus areas
- Federal & state severance tax mechanics
- Supplemental withholding rules
- FICA, SDI, TDI, DBL on severance
- Reconciliation at filing time
Articles from the Tax & Withholding Desk
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Severance Tax Rate in New Jersey 2026: The TDI and FLI Wrinkle Most Guides Miss
New Jersey withholds federal supplemental tax plus graduated state income tax on severance, then adds two capped payroll deductions most guides ignore: Temporary Disability Insurance and Family Leave Insurance. Whether they hit your payout turns entirely on timing and how much you have already earned this year.
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Severance Tax Rate in North Carolina 2026: How the Flat 3.99% Rate Actually Withholds
North Carolina's flat 3.99% income tax makes severance withholding refreshingly predictable, but the state's payroll formula skims 4.09%, and separation pay still delays unemployment week-for-week. Here is the flat-rate math, a Charlotte worked example, and why the state reconciliation is nearly a wash.
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Severance Tax Rate in California 2026: The 6.6% Rate, the 10.23% Trap, and the SDI Question
California applies a 6.6% state supplemental rate to severance — not the 10.23% rate it uses for bonuses and stock options — on top of the federal 22%. Whether the 1.3% SDI deduction applies turns on one clause of the Unemployment Insurance Code, and severance never reduces a California unemployment check.
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Withheld at 22%, Taxed at 32%: The Severance Reconciliation Gap in 2026
The flat 22% federal withholding on severance under-collects for everyone above the 22% bracket — often $5,000 to $30,000 due at filing. The gap in dollars, the Form 1040-ES safe harbors that switch off the underpayment penalty, and the installment timing that moves the $1 million threshold.
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Severance Tax Rate in Texas 2026: No State Income Tax Doesn't Mean No Tax
Texas has no state income tax, but Texas severance is still subject to federal supplemental withholding, FICA, and the state's specific rules for how severance interacts with unemployment claims. Here's the actual math and the source-state issue that catches remote workers.
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Severance Tax Rate in New York 2026: The Stacked Withholding Decoded
New York stacks state, city, and federal supplemental withholding on severance, producing combined rates near 40% for typical white-collar separations. Here's how the math actually works, what NYC residency triggers, and what reconciles at tax-filing time.