If I take a severance package from my employer, how will it be taxed?

By Denise Appleby AAA
A:



It depends on your tax bracket. For instance, if your employer offers you a payout of $100,000, you will owe federal tax of $35,000. You may also owe estate tax.



It may be best to check with your tax professional; he or she may be familiar with your tax rate and know whether any other taxes will apply.



For related reading, see Negotiating Severance Agreements.



This question was answered by Denise Appleby
(
Contact Denise)



RELATED FAQS

  1. How are savings bonds taxed?

    Learn who is responsible for reporting U.S. EE savings bond interest for taxation and when the interest can be reported for ...
  2. What are the Social Security tax caps?

    Learn how the Social Security tax cap works, what percentage of income is deducted for Social Security taxes and the history ...
  3. Are credit card rewards considered taxable income by the IRS?

    Learn about when the Internal Revenue Service considers the financial value of gifts received from credit card reward programs ...
  4. How are Pay As You Go pension plan benefits taxed?

    Discover how the IRS treats pay-as-you-go pension plan benefits that are received as income in retirement, both for Social ...
RELATED TERMS
  1. Section 7702

    The section of the United States Internal Revenue Code that defines ...
  2. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
  3. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
  4. Proof of Charitable Contributions

    Substantiation required by the Internal Revenue Service for a ...
  5. Corporate Inversion

    Re-incorporating a company overseas in order to reduce the tax ...
  6. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital ...

You May Also Like

Related Articles
  1. The Affordable Care Act is the largest change to the tax code in 20 years that could affect you when you file that 2014 tax return next year.
    Taxes

    How Might The Affordable Care Act Affect ...

  2. Venezuela has more oil than anyone, and Brazil and Argentina have lots going for them, too, so why can't they get out of their own way economically?
    Economics

    Where NOT To Invest in Latin America

  3. Credit & Loans

    7 Times It Costs More To Pay With A ...

  4. Investing News

    Munis, Midterms And What To Watch

  5. Don’t waste your time wading through the slew of private and corporate tax websites out there. Go straight to the source: IRS.gov.
    Taxes

    The Most Helpful Tools On The IRS.gov ...

Trading Center