State severance tax
Severance withholding is layered, and the layers are state-specific. Every package starts with the flat 22 percent federal supplemental rate (37 percent on amounts above $1 million in a calendar year), but what stacks on top of that — and what reconciles at filing — turns entirely on the state of residence and the source state of the underlying work.
New York is the high end of the range. The state applies an 11.7 percent supplemental withholding rate to high earners, and New York City residents stack a further 4.25 percent on top, producing combined withholding near 38 to 40 percent before FICA. Texas and the other no-income-tax states are the low end: federal-plus-FICA only, landing near 30 percent. None of these are final tax rates — supplemental withholding is a collection mechanism, and the actual liability reconciles against the year's total income at filing, which is why an early-year separation often produces a refund and a late-year lump sum often produces a balance due. The source-state rule is the trap for remote workers: severance attributable to services performed in a taxing state can be claimed by that state even after relocation.
Key figures
- 22% / 37%
- Federal supplemental withholding floor on every package (37% above $1M for the year) ‹IRS Pub. 15-A›
- 11.7%
- New York State supplemental withholding rate for high earners ‹NY Pub. NYS-50-T-Y›
- +4.25%
- Additional NYC resident supplemental withholding, stacked on the state rate
- ~38–40%
- Combined NY state-plus-city-plus-federal withholding before FICA
- $0 state
- Texas and the no-income-tax states: federal plus FICA only, near 30% combined
State-by-state withholding mechanics — supplemental rates, NYC and local stacking, FICA wage-base interaction, the source-state rule for relocated remote workers, and how it all reconciles at filing.
In this cluster
-
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.
-
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.
-
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.
-
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.
-
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.