2026 · Texas
Texas severance pay tax
Federal tax takes its 22% cut, but Texas takes nothing. And pays up to $605 a week in unemployment. This works out what you owe.
Texas layoff at a glance
| State tax on severance | None, no state income tax |
| State income tax | None |
| Unemployment weekly max | $605 for up to 26 weeks |
| Unemployment taxed by Texas? | No |
How Texas withholds on severance
Texas has no state income tax, so none of your severance is withheld for the state, a real edge over high-tax states. 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.
Texas has no state income tax at all, so neither your severance nor your unemployment faces a state levy, a group of just nine states. If you also claim unemployment, Texas pays up to $605 a week for up to 26 weeks, and does not tax it. That's the Texas layoff picture in one place, the severance tax here, the unemployment on its own Texas page.
Worked example: $40,000 severance in Texas
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 |
| Texas withholding | $0 |
| Net check | $28,140 |
| What it costs in tax | $11,210 |
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 Texas unemployment on top
Texas sizes your weekly check off your highest-earning quarter, up to $605 a week, mid-pack nationally (27th of 51). There is no separate dependent add-on. Duration 10-26 by base-period wages.
| Weekly benefit range | $75 - $605 |
| How the amount is set | Off your highest-earning quarter |
| Maximum duration | 26 weeks (10-26 by base-period wages) |
| Waiting week | Yes, one unpaid week |
| Dependent allowance | None |
| Taxed by Texas | No |
Stacked together, that $40,000 severance nets about $28,140 and Texas's unemployment can add up to $15,730 over 26 weeks, about 11 months of a $4,000 budget before you need a paycheck. File through Texas Workforce Commission; nail down the exact figure in the runway calculator.
If your next move is freelancing in Texas
A layoff is how a lot of 1099 careers start, and "Texas has no income tax" is only most of the story for the self-employed. Texas does have a business tax, the franchise (margin) tax, but it spares most of the self-employed twice over: sole proprietors are not taxable entities at all, and an LLC owes nothing until annualized revenue passes the no-tax-due threshold, $2,650,000 for the 2026 and 2027 report years. Above it the rate is 0.375% for retail and wholesale, 0.75% for everything else. An LLC under the threshold still files a Public Information Report each year, a form, not a tax.
The Texas 1099 calculator runs the federal side, which applies in full no matter what the state skips.
Questions about Texas severance tax
Is severance taxed higher in Texas?
No. It's withheld at a flat 22% federally and Texas takes no state tax at all, 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 $11,210 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 Texas tax my severance?
No, Texas has no state income tax, so your severance keeps its full value at the state level (federal tax and FICA still apply).
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 Texas layoff toolkit
- Texas unemployment benefits weekly amount and duration
- Runway calculator how long your money lasts
- Texas paycheck calculator take-home at your next job
- Texas 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.