Federal Supplemental Wage Withholding Rate (2026)
The IRS flat rate used to withhold federal income tax from severance pay and other supplemental wages.
Current value (2026)
22%
Federal supplemental wage flat rate (mandatory, >$1M per employer): 37%
Federal supplemental wage threshold above which the 37% flat rate becomes mandatory (per employer per calendar year): $1 million
Primary source
Historical values
| Year | Value |
|---|---|
| 2026 | 22% |
| 2025 | 22% |
| 2024 | 22% |
What this means if you were laid off
Your severance check will arrive with roughly 22% missing before it hits your account. That is the IRS flat supplemental withholding rate for wages outside your regular paycheck, including severance, signing bonuses, and commissions. Your employer applies it because the IRS requires it, not because it reflects your actual tax bracket.
The math is simple but the consequences are not obvious. If you were in the 10% or 12% federal bracket in a normal year, the 22% withholding significantly overstates what you actually owe. You will get the difference back as a refund when you file, but that refund can take months. If you need cash flow right after the layoff, the over-withholding hurts.
The opposite is true at high incomes. A $300,000 severance payment in a year where you also earned six months of salary puts you well into the 32% or 35% bracket. At 22% federal withholding, you are significantly under-withheld. Plan for an estimated tax payment to avoid penalties.
The 37% rate is separate and applies only to supplemental wages above $1 million paid by a single employer in a calendar year. It is rare outside of executive separation agreements.
State withholding adds on top. Some states publish a flat supplemental rate that applies to severance; others use your standard withholding election. If you are in California, New York, or Illinois, your combined federal and state withholding can reach 35% or higher before any money reaches you.
The withholding does not determine your tax bill. It determines how much is held back at the source. Your actual liability is calculated when you file, based on your total income, filing status, and deductions for the full calendar year. Use the withheld amount as a deposit, not as a final number.
Frequently asked questions
- Is severance pay subject to the same withholding as my regular salary?
- No. Severance is classified as supplemental wages under IRS rules. Employers typically apply the 22% flat rate rather than the graduated withholding tables used for your regular paycheck.
- What if my employer withholds too much?
- The excess withholding is applied against your total federal tax liability for the year. If your actual liability is lower than the amount withheld, the IRS refunds the difference when you file your return.
- Does the 22% rate apply to my state taxes too?
- No. Federal and state withholding are separate. Some states publish their own flat supplemental rate; others apply your standard state withholding election. The 22% figure is federal only.
- Can I ask my employer to withhold at a different rate?
- You can submit a revised W-4 to adjust withholding on regular wages, but the supplemental flat rate for severance is typically applied by your employer's payroll system without adjustment. Consult your payroll department before the final check is issued.
- When does the 37% rate apply?
- The 37% flat rate applies to supplemental wages above $1 million paid by the same employer in the same calendar year. For most severance situations, the 22% rate applies.
See your severance after taxes
Enter your offer and state to calculate your net take-home and runway.
Calculate your severanceLast verified: 2026-05-04. Not legal, financial, or tax advice. Methodology.