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Last Updated: 5/29/2018

Severance Pay

Severance pay is taxable to Minnesota and subject to state withholding if your employee performed their work in Minnesota. The same rule applies to Minnesota nonresidents.

What if my employee worked in more than one state during their employment?

The percentage of time your employee worked in Minnesota is the percentage of their severance pay taxable to Minnesota. For example, if your employee worked nine years in Minnesota and one year in Florida, 90 percent of their severance pay is taxable to Minnesota.
 

How much Minnesota tax do I withhold on severance pay?

It depends on how you identified the payments on your employee’s paystub or in your payroll records: