PTO Payout Standard Tax Withholding (US)
| Withholding Type | Standard Rate | Applies To | Details |
|---|---|---|---|
| Federal Supplemental Tax | 22% flat rate | All US employees | Mandated flat rate for lump sum bonuses/payouts |
| FICA Social Security | 6.2% | Up to annual wage cap | Standard federal employment tax contribution |
| FICA Medicare | 1.45% | All wages | Standard federal medicare tax contribution |
| State & Local Income Tax | Varies (0% – 10%+) | Depending on location | State-specific supplemental wage withholding rules |
How to Calculate Unused Vacation & PTO Payouts
Whether you are leaving your job, resigning, being laid off, or your company offers a PTO cash-out program, knowing how much cash you will receive for your unused PTO is helpful. PTO payouts are considered wages and are subject to tax withholding.
1. Determine Your Total Unused PTO Hours
Look at your most recent pay stub or log into your HR payroll portal to find your current available PTO balance. Ensure that any pending requests or carry-over guidelines are accounted for.
2. Determine Your Hourly Rate of Pay
If you are paid hourly, your hourly pay rate is simply your standard wage. If you are salaried, you need to calculate your hourly equivalent rate:
Hourly Equivalent Rate = Annual Gross Salary ÷ (Weeks per Year × Hours worked per week)
Example: For an annual salary of $65,000 working a standard 40-hour week (52 weeks a year):$65,000 ÷ 2,080 hours = $31.25 per hour.
3. Calculate the Gross Payout
Multiply your unused hours by your hourly rate to find your gross payout:
Gross PTO Payout = Unused PTO Hours × Hourly Pay Rate
4. Factor in Supplemental Taxes
Unlike regular wages which are taxed on a sliding bracket, PTO payouts are supplemental wages. In the United States, employers must withhold a flat 22% for federal income tax, plus FICA (7.65%) and state tax. This estimator helps you see the actual net cash you will receive.