Texas Severance Pay Calculator 2026

Texas severance tax: how the math works

Federal supplemental withholding

22% (37% above $1M/yr)

Texas state supplemental

None (no state income tax)

Combined income tax withholding

22.0%

FICA (Social Security + Medicare)

7.65% (+ 0.9% above $200K)

Example: 12-week severance on $75K salary, gross

$17,308

After income tax withholding (before FICA)

$13,500

These are withholding rates, not final tax rates. Actual tax owed reconciles at filing time against the year's total income and marginal bracket. The calculator above estimates your specific situation.

Texas legal protections for severance recipients

Common questions

What is the severance tax rate in Texas for 2026?

Texas has no state income tax, so severance is subject only to federal supplemental withholding (22% on amounts under $1 million in a calendar year, 37% above) plus FICA (6.2% Social Security up to the wage base + 1.45% Medicare). Combined withholding is approximately 29-30% before FICA reconciliation.

Does Texas require employers to pay severance?

No. Texas does not require employers to pay severance by law; it remains a matter of company policy or individual employment contract. However, Texas has no state income tax, so your severance will only have 22% federal withholding, not additional state tax.

How does Texas treat severance for unemployment benefits?

Severance generally affects unemployment eligibility in two patterns: (1) Salary continuation: paid as weekly pay continuation typically delays UI eligibility week-for-week. (2) Lump-sum: treatment varies by state; in many states the lump sum is attributed to the week of separation rather than spread across the period it represents. Filing for UI immediately and letting the state agency determine the allocation is the standard approach; appeals are routine if the initial determination is wrong.

Is the calculator accurate for high earners in Texas?

For severance amounts under $1 million in a single calendar year, yes. For amounts above $1 million, the federal supplemental rate jumps from 22% to 37% on the excess, relevant for executive severance, partner-level packages, or large bonus-plus-severance combinations in the same year. High-dollar severance recipients should reconcile actual federal tax against marginal brackets at filing time.

Can I negotiate severance differently in Texas?

Beyond state specifics, negotiation leverage typically lives in extended healthcare, accelerated equity vesting, non-compete narrowing, outplacement upgrades, and release-of-claims scope. Consider consulting an employment attorney licensed in Texas.