Are VSP/ISP's taxed at your regular tax rate? A colleague once told me they were taxed like a bonus.. closer to 50% since they are like a bonus and not regular payroll. Can anybody who's received this before confirm?
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Bonuses are not taxed at a higher rate. The tax withheld might be higher but it is still regular income and taxed as such.
OP here.
So if i get an ISP -- the package says I will be paid through May 31. That is supplemental income and taxed at 50% too?
Then the 2 months base should be taxed at half.
Our QPB should be paid too, right?
yes, agree with poster about 50% tax rate, I'm poster @H4I0WaX-fkc and with the supplemental rate on the taxes I described, I paid approx. 50%. I too live in CA
i paid more like 50%. I live in CA.
Guess it will be taxed like ordinary income, eventually, even as the retention for tax purposes is treated at a higher rate.
when I got my severance package a few years ago it was taxed at supplemental rate for all portions which weren't considered my regular income. My vacation payout and all the weeks for my LOS came a a separate check from my last paycheck and were all taxed at supplemental rate and on top of that since I had to claim it all as income the following year, I was bumped up into a higher tax bracket because it looked like I made over 175K :( so my regular income tax was impacted. The packages are large but, you pay for them in taxes for sure.
If it's not your regular pay it's like a bonus. Wish it wasn't but it is. I cashed out some sick time (I'm hourly) and it was at the bonus rate. Anything not your regular paycheck is cashed out high. Why? Wish I knew. However, (not that this will make you feel better now) you should, depending on your filing status, exemptions, etc, you should be getting a lot of it back as a tax refund if you've overpaid. I got a HUGE refund (mid 4 figures) since I cashed out a bunch of PA last year.