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Maryland · severance & unemployment

Severance pay in Maryland

  • 4.75% Maryland tax on your severance, plus 22% federal and 7.65% Social Security/Medicare.
  • Unemployment: up to $430 a week, for up to 26 weeks.
  • File your unemployment claim right away — it protects your claim start date.

In Maryland, your first decisions are unusually connected: file unemployment in the week your job ends, document whether severance or vacation pay is allocated to future weeks, and check both Maryland state and county withholding on your final payroll. Maryland does not use a single flat tax on a severance check; your final liability depends on taxable income, filing status, deductions, credits, residency, and the payment structure.

Estimate my take-home → See the first 72 hours ↓
The essentials

Maryland at a glance

Maryland state income tax
2.00%–6.50%marginal
Rate on Maryland taxable income; 2026 statutory schedule, before local (county) tax.
Maryland local income tax
2.25%–3.20%
County/Baltimore City piggyback tax added on top of the state rate; varies by residence.
Federal supplemental withholding
22%
2026 flat withholding method for separately identified supplemental wages; not necessarily final federal tax.
Employee FICA
7.65%
2026 assumption: 6.20% Social Security plus 1.45% Medicare, subject to Social Security wage-base rules.
Maryland UI weekly benefit
$50–$430
2026 range based on base-period wages; $430 is the maximum, not an expected award.
Maryland UI duration
Up to 26 weeks
Maximum regular UI duration during a benefit year; actual entitlement depends on eligibility and balance.
Waiting week
None
Maryland does not currently apply an unpaid waiting week; confirm in BEACON when filing.
Filing timing
File the week unemployment begins
Claim effective date is generally the Sunday of the week the initial claim is filed; certification is Sunday–Saturday.
Plain English

What severance means in Maryland

Maryland law does not generally guarantee severance unless an employment contract, agreement, or policy promises it. Maryland payroll materials treat severance, dismissal pay, and vacation pay as taxable wages for reporting, while Maryland UI rules may allocate severance, wage continuation, or pay in lieu of notice to weeks after separation.

A 22% federal supplemental-wage withholding rate is a payroll method, not a flat tax on your severance. Final federal and Maryland liability depends on filing status, deductions, credits, residency, total annual income, prior withholding, and whether the payment is a lump sum, installment, or salary continuation. Maryland also requires local (county) withholding through the payroll tables, so your paycheck reflects both a state and a local rate.

See the math

A worked example

The assumptions
  • Maryland resident earning $62,400 annual salary
  • 2 years with employer
  • 4 weeks of severance
  • Lump-sum payment of 4 × $1,200 weekly salary = $4,800
  • Separate supplemental-wage payroll method using 22% federal withholding
  • Employee FICA assumed at 7.65%; Social Security wage base not reached
  • Maryland state + local withholding shown as ~8% combined illustrative estimate (state plus a typical ~3% county rate); your county rate ranges 2.25%–3.20%
  • Single filer; final tax liability is not calculated
Estimated withholding
Gross severance$4,800
Federal (22%)-$1,056
FICA (7.65%)-$367.20
Maryland state + local (~8% est.)-$384
Illustrative take-home $2,992.80

Illustrative payroll-withholding estimate - not final tax advice. Actual take-home varies with your county rate, benefits, retirement, and other deductions.

Run your own numbers →
Benefits

Unemployment in Maryland

01You generally must be unemployed through no fault of your own, able and available for work, actively seeking work, and monetarily eligible. Maryland's current claimant guidance says sufficient wages generally means at least $1,176.01 in one base-period quarter and at least $1,800 across at least two quarters; the standard base period uses the first four of the last five completed quarters, with an alternate period available in limited circumstances.

02Maryland's published benefit schedule ranges from $50 to $430 weekly, based on qualifying base-period wages; the schedule, rather than salary alone, determines the amount. Severance, pay in lieu of notice, wage continuation, vacation, sick pay, or other separation payments may be allocated to particular weeks and may reduce or cancel UI for those weeks, so report them. File weekly certifications after each Sunday–Saturday benefit week, report gross earnings for the week work was performed, complete at least three valid reemployment activities including one job contact, and check the official Division of Unemployment Insurance decision for your claim.

Move fast

Your first 72 hours

  1. 01
    Save the termination letter, severance agreement, final-pay statement, PTO balance, and benefit-end date.
    Maryland UI may need the payment type, amount, and period to determine whether income affects specific claim weeks.
  2. 02
    File an initial claim in BEACON during the same week your unemployment starts, even if severance is pending.
    Maryland generally makes the claim effective on the Sunday of the week the initial claim is filed; waiting can move the claim week.
  3. 03
    Register with Maryland Workforce Exchange, create or upload a visible résumé, and record three weekly reemployment activities including one job contact.
    These are Maryland's stated work-search steps and records may be needed for weekly certification.
  4. 04
    Ask payroll whether the severance will be separately identified, paid as salary continuation, or combined with regular wages; compare the paystub with the Maryland withholding tables.
    The payment structure affects payroll withholding and may affect UI allocation, while withholding is not final tax liability.
  5. 05
    Check when employer health coverage ends and compare COBRA with a Marketplace plan; apply for Marketplace coverage within 60 days of losing job-based coverage if appropriate.
    Loss of job-based coverage creates a federal Special Enrollment Period and coverage timing can affect your household budget.
  6. 06
    Continue weekly certifications and report work, gross earnings, severance, vacation, sick pay, pension, or other payments when requested.
    Maryland says benefits are payable only for certified weeks and unreported income can delay, reduce, or create an overpayment.
Common questions

Maryland severance FAQ

Does Maryland guarantee severance when I am laid off?

Generally no. Severance is usually owed only if an employment contract, separation agreement, handbook, or enforceable policy provides it.

Will Maryland take a flat percentage from my severance check?

Not necessarily. Maryland state and local withholding follows payroll tables and your county. Your eventual Maryland tax is based on Maryland taxable income and applicable credits, not simply the check's gross amount.

Should I wait until severance ends before filing Maryland unemployment?

Usually do not wait. File in the week unemployment begins and disclose the severance terms; the Division determines whether and how the payment affects particular weeks.

Can a Maryland lump-sum severance delay unemployment?

It may. Maryland UI decisions describe allocating severance or pay in lieu of notice to days and weeks after separation; if allocated income is below the weekly benefit amount, the difference may be payable, while higher allocated income may disqualify that week.

What happens to unused vacation or PTO in Maryland?

Payment depends on the employer's written policy or agreement. Maryland's wage-payment guidance says unused vacation may be payable when the employer's policy or contract provides for it; report the payment to UI because it may affect claim weeks.

How many Maryland job-search activities must I record?

The claimant guidance requires at least three valid reemployment activities each week, including at least one job contact, unless an approved exemption applies.

Can I receive Maryland UI while working part time?

Possibly. Report gross earnings for the week you performed the work. Maryland may reduce benefits, and full-time work or earnings equal to or above the weekly benefit amount generally means you are not unemployed for that week.

Sources & verification (9)

Figures are payroll-withholding and benefit-maximum estimates verified 2026-08, not final tax or an eligibility decision. Rules, rates and benefit amounts change — confirm your situation with Maryland's official agency. NextClara is not a law firm, tax preparer, employer, or government agency, and gives educational estimates only.