Ask The Experts: Retirement

By Reg Jones

Tax on cashed-in leave pay

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Q. How much leave will my CSRS wife be taxed on $15,000 of cashed-in leave? I am trying to project 2013 estimated tax payments. My wife retired and gets a Voluntary Separation Incentive Pay of $25,000 and — can you confirm? — about $7,000 will be withheld in tax.

A. The rules are the same for annual leave lump-sum payments and VSIPs:

Federal tax: 25 percent.

State tax, if applicable: 4 percent.

Local tax, if applicable: 1 percent.

Social Security tax, if applicable: 6.2 percent

Medicare: 1.45 percent.

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