what is severance pay taxed at 
severance pay is taxed at the same tax bracket as when you were fully employed and earning the same salary this is the case if the severance payment is equal to what your salary was if it is less then you will be taxed at the appropriate tax bracket the bottom lineseverance pay is offered to employees of a company who have been laid off employees are laid off for a variety of reasons usually due to downsizing or redundancy but other reasons may be included employees who are laid off are done so due to corporate decisions as opposed to the quality of their work there are exceptions to these situations and severance may be offered for other reasons as well severance is offered to employees to help soften the blow of losing their jobs and to give them a cushion while they look for another job most severance pay also comes with the stipulation that the employee cannot sue the company or speak badly of it 