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Vermont · severance & unemployment

Severance pay in Vermont

  • 6% Vermont tax on your severance, plus 22% federal and 7.65% Social Security/Medicare.
  • Unemployment: up to $757 a week, for up to 26 weeks.
  • File your unemployment claim right away — it protects your claim start date.

If your job just ended in Vermont, three issues dominate: (1) your final paycheck must arrive within 72 hours if you were fired, but accrued PTO/vacation is not automatically payable unless your employer's policy says so; (2) Vermont has a progressive state income tax (3.35%–8.75%) with a flat 6.6% supplemental withholding rate on severance, so your take‑home depends on how the payment is classified; and (3) unemployment benefits start after a one‑week unpaid waiting period, and salary‑continuation severance can delay your first payment while lump‑sum may not.

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

Vermont at a glance

State income tax
3.35%–8.75% (4 brackets)
progressive rates for TY2026
State supplemental withholding
6.6%flat
on severance/bonuses; Vermont withholds supplemental wages at 30% of the federal 22% rate = 6.6%
Federal supplemental withholding
22% (up to $1M)
IRS rule for supplemental wages
FICA
7.65%
6.2% Social Security + 1.45% Medicare
Unemployment max weekly
$705
maximum for the current July 2026 benefit-year schedule (VT DOL)
Unemployment duration
26weeks
maximum standard duration
Waiting week
1week (unpaid)
must certify for it to activate claim
Final paycheck deadline
72hours
if discharged, under 21 V.S.A. § 342(c)
Plain English

What severance means in Vermont

In Vermont, severance is taxed as ordinary wage income. For withholding, the IRS treats a separate lump‑sum severance payment as 'supplemental wages,' so your employer withholds federal income tax at a flat 22% (37% above $1M of supplemental wages in the year). Vermont withholds supplemental wages at 30% of the federal rate, which works out to a flat 6.6%. Social Security (6.2%) and Medicare (1.45%) also apply. These are withholding rates, not your final tax.

Your actual Vermont state tax liability depends on your total annual taxable income, filing status, deductions, and credits. Vermont uses four graduated brackets (3.35%, 6.60%, 7.60%, 8.75%). If your year's income is low, your final tax may be lower than what was withheld and you could get a refund; if high, you may owe more. Whether severance is paid as a lump sum or as salary continuation can also affect unemployment timing, but not the fact that it is taxable wage income.

See the math

A worked example

The assumptions
  • Annual salary: $68,000
  • Years employed: 5
  • Severance: 8 weeks' pay, lump sum
  • Gross severance: $10,461.54 (8/52 of $68,000)
  • State withholding assumption: 6.6% supplemental rate (30% of federal 22%)
  • Federal withholding assumption: 22% supplemental rate
  • FICA assumption: 7.65% (6.2% + 1.45%)
  • Filing status: Single, standard deduction
Estimated withholding
Gross severance$10,461.54
Federal (22%)-$2,301.54
FICA (7.65%)-$800.31
Vermont state (6.6%)-$690.46
Illustrative take-home $6,669.23

Illustrative payroll-withholding estimate only—actual Vermont tax depends on your full-year income, filing status, deductions, and credits; not final tax advice.

Run your own numbers →
Benefits

Unemployment in Vermont

01In Vermont, you generally qualify for unemployment if you lost work through no fault of your own, earned sufficient wages in your base period (first 4 of the last 5 completed quarters), and are able, available, and actively seeking work. Your weekly benefit amount is 1/45th of your earnings in your two highest quarters, with a minimum of $72 and a maximum of $705 for the current July 2026 benefit-year schedule. Benefits last up to 26 weeks.

02Vermont has a one-week unpaid waiting period at the start of a new claim; you must still certify for that week. Severance can affect when benefits start: salary continuation (regular paychecks after separation) is typically treated as ongoing wages and may delay your first payment until it ends, while lump-sum severance may not delay benefits but must be reported. You must file weekly claims, report any earnings, and meet job-search requirements. File as soon as possible at the Vermont Department of Labor's e-Services portal.

Move fast

Your first 72 hours

  1. 01
    Confirm your final paycheck timing and amount.
    Vermont law requires discharged employees be paid all wages within 72 hours; delays can trigger penalties.
  2. 02
    Review your severance agreement for payment type (lump sum vs salary continuation) and any non-compete clauses.
    Payment structure affects unemployment timing; restrictive covenants can impact job search and benefits.
  3. 03
    File your unemployment claim online through Vermont's e-Services portal.
    Benefits are not backdated; filing starts your claim clock and the one-week waiting period.
  4. 04
    Gather documents: SSN, employer details, separation date/reason, severance letter, final pay stub.
    You'll need these to file accurately and report severance to avoid overpayment or fraud findings.
  5. 05
    Start and log job-search activities immediately.
    Vermont requires weekly certification that you are able, available, and actively seeking work.
  6. 06
    Check health coverage options (COBRA or Vermont Health Connect) and note deadlines.
    Losing employer coverage triggers election windows; subsidies may be available based on income.
Common questions

Vermont severance FAQ

Does Vermont require my employer to pay out unused PTO or vacation when I'm laid off?

Not automatically. Vermont law does not mandate PTO/vacation payout at separation; it depends on your employer's written policy or contract. A bill (H.295) has been introduced but is not enacted as of August 2026.

Will my severance delay my Vermont unemployment benefits?

It depends on how severance is paid. Salary continuation (regular paychecks after separation) is typically treated as ongoing wages and may delay your first payment. Lump-sum severance may not delay benefits but must be reported. The Department of Labor issues a written determination.

What is the one-week waiting week and do I have to file for it?

Yes. Vermont has a one-week unpaid waiting period at the start of a new claim. You must still certify for that week online; it counts toward your claim but is not paid.

How is my Vermont weekly unemployment amount calculated?

Vermont uses 1/45th of your earnings in your two highest quarters in the base period, subject to a minimum ($72) and maximum ($705 for the current July 2026 schedule). Your determination letter states your exact amount.

Is severance taxed differently from regular pay in Vermont?

For withholding, yes: severance is treated as supplemental wages, so federal withholding is a flat 22% and Vermont withholds at 30% of that (a flat 6.6%). For final tax, severance is ordinary income taxed at your marginal bracket (3.35%–8.75%).

When must my employer give me my final paycheck if I was fired?

Within 72 hours of discharge under 21 V.S.A. § 342(c). If you quit, payment is due on the last regular payday or the following Friday if there is no regular payday.

Sources & verification (7)

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 Vermont's official agency. NextClara is not a law firm, tax preparer, employer, or government agency, and gives educational estimates only.