2026 · New Jersey
New Jersey severance pay tax
Federal 22% plus New Jersey's regular withholding. But that's withholding, not your tax. This works out what you owe.
New Jersey layoff at a glance
| State tax on severance | Regular withholding tables |
| State income tax | Graduated, up to 10.8% |
| Unemployment weekly max | $905 for up to 26 weeks |
| Unemployment taxed by New Jersey? | No |
How New Jersey withholds on severance
New Jersey has no single flat supplemental rate, severance is withheld using the regular tables, so the amount tracks your bracket. 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.
New Jersey taxes income on a graduated scale topping out at 10.8%, so a large severance can be pushed into that top rate. If you also claim unemployment, New Jersey pays up to $905 a week for up to 26 weeks, and does not tax it. That's the New Jersey layoff picture in one place, the severance tax here, the unemployment on its own New Jersey page.
Worked example: $40,000 severance in New Jersey
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 |
| New Jersey withholding | −$2,422 |
| Net check | $25,718 |
| What it costs in tax | $13,632 |
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 New Jersey unemployment on top
New Jersey sizes your weekly check off your recent wages, up to $905 a week, one of the more generous in the country (4th of 51). There is no separate dependent add-on. Duration 20-26 (= weeks worked, up to 26); max $905 eff 2026-01-01.
| Weekly benefit range | $186 - $905 |
| How the amount is set | Off your recent wages |
| Maximum duration | 26 weeks (20-26 (= weeks worked, up to 26); max $905 eff 2026-01-01) |
| Waiting week | No waiting week |
| Dependent allowance | None |
| Taxed by New Jersey | No |
Stacked together, that $40,000 severance nets about $25,718 and New Jersey's unemployment can add up to $23,530 over 26 weeks, about 12 months of a $4,000 budget before you need a paycheck. File through New Jersey Department of Labor and Workforce Development; nail down the exact figure in the runway calculator.
Questions about New Jersey severance tax
Is severance taxed higher in New Jersey?
No. It's withheld at a flat 22% federally and by New Jersey's regular tables, 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 $13,632 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 New Jersey tax my severance?
Yes, New Jersey taxes severance as wages. New Jersey has no single flat supplemental rate, severance is withheld using the regular tables, so the amount tracks your bracket.
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 New Jersey layoff toolkit
- New Jersey unemployment benefits weekly amount and duration
- Runway calculator how long your money lasts
- New Jersey paycheck calculator take-home at your next job
- New Jersey 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.