Unused annual leave payout and Social Security


Q. Your response on Aug. 2 indicates the lump-sum payment of unused annual leave is reduced automatically by 25 percent to cover federal, state and local taxes. The lump-sum payment is subject to Social Security withholdings. Is the Social Security taken out as part of the 25 percent, is it taken before the taxes come out, or after the taxes come out?

A. It’s included in the 25 percent.


About Author

Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.


  1. If the lump sum AL payout pushes you over the max income subject to social Security taxes for a given calendar year will the payroll system catch that and reduce the 25% withhold or will you have to identify it in your tax statement as excess SS tax withheld.

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