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Severance Package Negotiations Q&A: Is Severance Pay Taxable?

above-the-bar-logo-no12.jpgThis is a very common question received by our New York Severance Package Attorneys. It is important to seek the advice of your accountant regarding taxation issues but here are some general tips. Generally, yes, severance pay is considered taxable as wages. In addition, payments you receive for accrued but unused vacation days and sick days are taxable. However, generally, your former employer’s payments to your health insurance provider for continued coverage under COBRA may not be attributed as income to you and may be tax-free to you. There could be potential tax consequences of payments for stock options, pension credits and outplacement services as well. Our New York Severance Package Lawyers have negotiated many severance pay agreements and can help you understand and maximize the terms of your severance package. Again you should seek the advice of your tax professional regarding your specific tax issues as we are not tax attorneys and cannot provide any specific advice.