{"id":552669,"date":"2023-02-16T16:00:16","date_gmt":"2023-02-16T13:00:16","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/taxes-2023-how-does-severance-pay-get-taxed\/"},"modified":"2023-02-16T16:00:16","modified_gmt":"2023-02-16T13:00:16","slug":"taxes-2023-how-does-severance-pay-get-taxed","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/taxes-2023-how-does-severance-pay-get-taxed\/","title":{"rendered":"#Taxes 2023: How Does Severance Pay Get Taxed?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2f5f589a7e5\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2f5f589a7e5\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/taxes-2023-how-does-severance-pay-get-taxed\/#Taxes_2023_How_Does_Severance_Pay_Get_Taxed\" >Taxes 2023: How Does Severance Pay Get Taxed?<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/taxes-2023-how-does-severance-pay-get-taxed\/#Is_Severance_Pay_Taxable\" >Is Severance Pay Taxable?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/taxes-2023-how-does-severance-pay-get-taxed\/#What_About_Sick_Pay_or_Payment_for_Vacation_Days\" >What About Sick Pay or Payment for Vacation Days?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/taxes-2023-how-does-severance-pay-get-taxed\/#What_Types_of_Taxes_Do_I_Have_To_Pay\" >What Types of Taxes Do I Have To Pay?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/taxes-2023-how-does-severance-pay-get-taxed\/#Is_There_a_Way_To_Reduce_Taxation_of_Severance_Pay\" >Is There a Way To Reduce Taxation of Severance Pay?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"Taxes_2023_How_Does_Severance_Pay_Get_Taxed\"><\/span>Taxes 2023: How Does Severance Pay Get Taxed?<span class=\"ez-toc-section-end\"><\/span><\/h1>\r\n<div id=\"\">\n                            \n                            \n                                                        \n                            <div class=\"article-thumbnail\">\n    <div class=\"article-thumbnail--thumbnail\" style=\"padding-top: 56%;\">\n        <img decoding=\"async\" src=\"https:\/\/cdn.gobankingrates.com\/wp-content\/uploads\/2020\/04\/woman-walking-out-after-getting-laid-off-iStock-1182950218.jpg?webp=1&amp;w=675&amp;quality=75\" class=\"attachment-full size-full wp-post-image\" alt=\"Fired woman leaving the office building with her belongings in a box and looking sad - losing a job concepts.\" sizes=\"(max-width: 1920px) 100vw, 1920px\"><\/div>\n    <p>\n                    andresr \/ Getty Images            <\/p>\n<\/div>\n<p>Part of the reason investors fled the stock market in 2022 was over fears of a potential recession in 2023. With inflation reaching multi-decade highs and the Fed aggressively raising interest rates, many economists feel that at least some type of recession is likely.<\/p>\n<p><strong><em>Explore: 6 Types of Retirement Income That Aren\u2019t Taxable<br>Related: 3 Ways Smart People Save Money When Filing Their Taxes<\/em><\/strong><\/p>\n<p>In response to this potential downswing \u2014 and perhaps reflecting slowing business conditions they were already experiencing \u2014 many companies already began laying off some of their workers in 2022. Typically, corporate layoffs come with severance packages, softening the blow for ex-employees and giving them time to find new employment.<\/p>\n<p>If you were one of the unfortunate ones to lose your job in 2022, you should be aware that there may be tax consequences when you file your 2023 return. Here are the most important things to know.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Is_Severance_Pay_Taxable\"><\/span>Is Severance Pay Taxable?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>One of the unfortunate realities about severance pay is that it is fully taxable. In the eyes of the IRS, severance pay is the same as your ordinary wages or salary.<\/p>\n<p>When you think about it, that actually makes sense. Severance pay is typically described as the continuation of your salary or wages in exchange for you accepting the termination of your employment. Essentially, your employer is offering to continue to pay you for a matter of weeks or months in exchange for getting your long-term salary off the books.<\/p>\n<p>So, even though you don\u2019t physically have to report to work, your severance pay effectively continues your salary for a predetermined time.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_About_Sick_Pay_or_Payment_for_Vacation_Days\"><\/span>What About Sick Pay or Payment for Vacation Days?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Most any pay that you receive upon your termination is considered taxable income. This <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lies to any sick pay or accrued paid time off that your employer includes in your payment.<\/p>\n<p>Of note, any unemployment compensation you may receive from federal or state governments is also considered taxable income.<\/p>\n<p><strong><em>Take Our Poll: How Much of a Tax Refund Do You Expect in 2023?<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Types_of_Taxes_Do_I_Have_To_Pay\"><\/span>What Types of Taxes Do I Have To Pay?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">General<\/a>ly speaking, you should consider your severance pay to simply be a continuation of your regular paycheck. This means you\u2019ll pay the same taxes on your severance pay that you pay on your ordinary income.<\/p>\n<p>Federal income tax is the most obvious tax obligation, along with state income tax if you live in a state that has them. You\u2019ll also pay <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Social<\/a> Security taxes on your severance pay, unless you earn more than the wage limit in any given year ($147,000 for 2022).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Is_There_a_Way_To_Reduce_Taxation_of_Severance_Pay\"><\/span>Is There a Way To Reduce Taxation of Severance Pay?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There\u2019s no way to avoid taxation of your severance pay unless you put it in a tax-advantaged account, just like you can\u2019t avoid taxes on your ordinary income unless you do the same. For example, if you take $6,000 of your severance pay and put it into an HSA or IRA, you can deduct that amount from your taxes. Beyond that, it\u2019s not really possible to avoid taxation of your severance pay.<\/p>\n<p>However, there is one scenario in which you might be able to lower the taxes you owe. If you can convince your employer to spread your severance pay out across two or more years, you\u2019ll only have to declare that income in the years you receive it. If you earn less outside money in one of those years, you may fall into a lower tax bracket and therefore owe less in taxes on your earnings.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong><em>More From GOBankingRates<\/em><\/strong><\/p>\n\n\n\n\n                        <\/div>\r\n<blockquote><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/blockquote>\r\n<blockquote>\r\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\r\n<\/blockquote>\r\n<blockquote>\r\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\r\n<\/blockquote>\r\n\r\n<span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/www.gobankingrates.com\/taxes\/filing\/how-does-severance-pay-get-taxed\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span>","protected":false},"excerpt":{"rendered":"<p>Taxes 2023: How Does Severance Pay Get Taxed? andresr \/ Getty Images Part of the reason investors fled the stock market in 2022 was over fears of a potential recession in 2023. With inflation reaching multi-decade highs and the Fed aggressively raising interest rates, many economists feel that at least some type of recession is&#8230;<\/p>\n","protected":false},"author":1,"featured_media":552670,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/cdn.gobankingrates.com\/wp-content\/uploads\/2020\/04\/woman-walking-out-after-getting-laid-off-iStock-1182950218.jpg","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-552669","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/552669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=552669"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/552669\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/552670"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=552669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=552669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=552669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}