Severance tax rate


Hello looking for ARIZONA State tax rate for severance payments


  • MatthewD
    MatthewD FreeTaxUSA Team

    Hi Gavila,

    In the state of Arizona, severance pay is taxed at the same marginal tax rates as your other sources of earned income. However, if you get a large lump sum as a severance, the payroll company may need to withhold more income taxes to make up the differences in the amount and timing. For example, you may pay the higher rate of 2.98%.

    According to reports, AZ will impose a flat tax in 2023 and later years.

    For federal purposes you may see withholdings of 22% on your severance pay, which may be more or less that your regular wages.