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How is severance pay taxed: 2025 guide

Hearing the words, "you're being laid off," can bring on one of the worst feelings in the world. After all, if you're like most people, you probably count on your job to provide you with a paycheck, not to mention health insurance and other valuable benefits. Without work, you may fear you'll end up borrowing and needing debt relief down the line.

When you find yourself in this tough situation, you have a lot of practical things to think about, including figuring out how severance pay is taxed.

Many employers offer a severance package, which can include things like payment of your past salary for a set period of time, continuation of employee benefits for a limited time, and even perks like career assistance

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