2026 · Illinois
Illinois severance pay tax
Federal 22% plus Illinois's 5.0% supplemental rate. But neither is your real tax rate. This works out what you owe.
Illinois layoff at a glance
| State tax on severance | Flat 5.0% supplemental withholding |
| State income tax | Flat 5.0% |
| Unemployment weekly max | $628 for up to 26 weeks |
| Unemployment taxed by Illinois? | Yes |
How Illinois withholds on severance
Illinois withholds a flat 5.0% on supplemental wages like severance. On top of that, the federal government withholds a flat 22% (37% over $1 million) and FICA, 6.2% Social Security up to the $184,500 wage base plus 1.45% Medicare.
Illinois taxes income at a flat 5.0%, which is the rate that applies to severance whichever way it's withheld. If you also claim unemployment, Illinois pays up to $628 a week for up to 26 weeks, and taxes it on the state return. That's the Illinois layoff picture in one place, the severance tax here, the unemployment on its own Illinois page.
Worked example: $40,000 severance in Illinois
A single filer, $40,000 severance paid separately, with $60,000 of other 2026 income:
| Federal withholding (22%) | −$8,800 |
| FICA (Social Security + Medicare) | −$3,060 |
| Illinois withholding | −$1,980 |
| Net check | $26,160 |
| What it costs in tax | $13,190 |
Over-withheld by about $650, expect roughly that back as a refund at filing. The withholding is a fixed rate; your actual tax is your marginal rate on the severance stacked on your other income.
Stacking Illinois unemployment on top
Illinois sizes your weekly check off your recent wages, up to $628 a week, mid-pack nationally (22th of 51). There is no separate dependent add-on. Duration 26 fixed; augmented max $748 w/ nonworking spouse, $859 w/ dependent child.
| Weekly benefit range | $51 - $628 |
| How the amount is set | Off your recent wages |
| Maximum duration | 26 weeks (26 fixed; augmented max $748 w/ nonworking spouse, $859 w/ dependent child) |
| Waiting week | Yes, one unpaid week |
| Dependent allowance | None |
| Taxed by Illinois | Yes |
Stacked together, that $40,000 severance nets about $26,160 and Illinois's unemployment can add up to $16,328 over 26 weeks, about 11 months of a $4,000 budget before you need a paycheck. File through Illinois Department of Employment Security (IDES); nail down the exact figure in the runway calculator.
Questions about Illinois severance tax
Is severance taxed higher in Illinois?
No. It's withheld at a flat 22% federally and 5.0% by Illinois, but it's taxed as ordinary income at your normal rates. The worked example on this page shows the gap in dollars: on a $40,000 severance, $8,800 of federal tax is withheld up front while the severance actually costs about $13,190 in tax for that filer. Whichever direction the gap runs, it settles up at filing, a refund if too much was taken, a bill to plan for if too little.
Does Illinois tax my severance?
Yes, Illinois taxes severance as wages. Illinois withholds a flat 5.0% on supplemental wages like severance.
Will I get a refund or owe more?
It depends on your bracket. The flat 22% over-withholds for lower earners (refund) and under-withholds for those in the 32 to 37% brackets (set aside the difference). The crossover sits where your marginal rate passes 22%: below it, every severance dollar was over-withheld and comes back; above it, the flat rate quietly under-collects and the difference lands on your return as a balance due. For the $40,000 example on this page with $60,000 of other income, the calculator's verdict is printed under the worked example. Enter your numbers above to see which way it goes for you.
Your Illinois layoff toolkit
- Illinois unemployment benefits weekly amount and duration
- Runway calculator how long your money lasts
- Illinois paycheck calculator take-home at your next job
- Illinois 1099 tax if you go freelance
An estimate for the 2026 tax year. State supplemental figures from the verified dataset, last verified 2026-07-24. Nothing you enter is stored. Not tax advice.