2026 · Montana
Montana severance pay tax
Federal 22% plus Montana's 5.0% supplemental rate. But neither is your real tax rate. Here's the real number.
Counts toward the $184,500 Social Security cap.
Wages, new job, spouse, sets your real tax rate.
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Montana layoff at a glance
| State tax on severance | Flat 5.0% supplemental withholding |
| State income tax | Graduated, up to 5.7% |
| Unemployment weekly max | $767 for up to 24 weeks |
| Unemployment taxed by Montana? | Yes |
How Montana withholds on severance
Montana 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.
Montana taxes income on a graduated scale topping out at 5.7%, so a large severance can be pushed into that top rate. If you also claim unemployment, Montana pays up to $767 a week for up to 24 weeks, and taxes it on the state return. That's the Montana layoff picture in one place, the severance tax here, the unemployment on its own Montana page.
Worked example: $40,000 severance in Montana
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 |
| Montana withholding | −$2,000 |
| Net check | $26,140 |
| What it actually costs in tax | $13,470 |
Over-withheld by about $390, 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 Montana unemployment on top
Montana sizes your weekly check off your recent wages, up to $767 a week, one of the more generous in the country (11th of 51). There is no separate dependent add-on. Duration 8-24 indexed (NOTE: spec's '28' NOT confirmed; DOL ETA caps 24).
| Weekly benefit range | $227 - $767 |
| How the amount is set | Off your recent wages |
| Maximum duration | 24 weeks (8-24 indexed (NOTE: spec's '28' NOT confirmed; DOL ETA caps 24)) |
| Waiting week | Yes, one unpaid week |
| Dependent allowance | None |
| Taxed by Montana | Yes |
Stacked together, that $40,000 severance nets about $26,140 and Montana's unemployment can add up to $18,408 over 24 weeks, about 11 months of a $4,000 budget before you need a paycheck. File through Montana Department of Labor & Industry; nail down the exact figure in the runway calculator.
Questions about Montana severance tax
Is severance taxed higher in Montana?
No. It's withheld at a flat 22% federally and 5.0% by Montana, but it's taxed as ordinary income at your normal rates. You settle up at filing.
Does Montana tax my severance?
Yes, Montana taxes severance as wages. Montana 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). Enter your numbers above to see which way it goes for you.
Your Montana layoff toolkit
- Montana unemployment benefits weekly amount and duration
- Runway calculator how long your money lasts
- Montana paycheck calculator take-home at your next job
- Montana 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.