Annuity
Annual Leave Lump Sum Calculator
What the annual leave you never used is worth when you leave federal service, and what actually lands in your account after withholding. The payment is projected over a calendar rather than multiplied, which is what decides whether January’s raise reaches any of it.
Informational only — not professional advice. This is an independent estimate, not an official one. Your agency certifies the leave balance and your payroll provider computes the payment; the withholding shown here is an estimate of what comes off, not of what you owe. FedAnnuity is not affiliated with OPM or the U.S. government.
Your 448 hours of unused annual leave are paid as one lump sum of $24,034 before tax, and about $16,908 of it reaches your account. It is not simply 448 hours at one rate: the balance is projected forward from your last day over 56 workdays, running out on 19 March 2027, and the pay adjustment effective 10 January 2027 lands inside that period, so 400 of the hours are paid at next year's rate.
5 U.S.C. § 5551(a) · 5 CFR 550.1204 · 56 workdays projected to 19 March 2027
| Hourly rate$110,000 ÷ 2,087 hours, rounded to the cent before it is multiplied | $52.71 |
|---|---|
| Annual leave projected448 hours is 56 workdays, running from the first workday after 31 December 2026 to 19 March 2027 | 448 hrs |
| Paid at your current rate48 hours × $52.71 | $2,530.08 |
| Paid at the adjusted rate400 hours × $53.76, on and after 10 January 2027 | $21,504.00 |
| Gross lump sumBefore any withholding, paid in a lump rather than over the period | $24,034.08 |
| Federal income tax withheld22% flat — the supplemental wage rate, not your bracket | − $5,287.50 |
|---|---|
| Social Security6.2% of $24,034 — the whole payment is under the wage base | − $1,490.11 |
| Medicare1.45% of the whole payment — there is no wage base | − $348.49 |
| Total withheld29.65% of the payment | − $7,126.10 |
| Reaches your accountUsually with your final salary payment, a few pay periods after you go | $16,907.98 |
22% is a withholding rate, not a tax rate. It is what the payroll office holds back, not what you owe. This payment is added to a whole year of federal salary on your return, so if your marginal rate is above 22% the flat rate has under-withheld and the difference comes due at filing. The surprise on a lump sum usually runs that way round, not the other.
The January adjustment is worth $420.00 on this payment. Applying 2.0% to the whole balance — the way the advice to retire in December is usually quoted — would put it at $472.28, because 48 of the hours are projected before the effective date and paid at the old rate. Worth having, and worth keeping next to what the date itself can cost: a commencing date one day out of place forfeits a whole month of annuity.
No deduction for retirement, health insurance, life insurance or the TSP comes out of a lump-sum payment, so you cannot defer any of it into the TSP and none of it counts toward your high-3 average salary or your creditable service. Unused sick leave is not paid at all — it converts to service credit instead.
How this is calculated
When you separate from federal service, the annual leave you have not used is paid to you in a single payment. 5 U.S.C. § 5551(a) sets what it is worth: “the pay the employee … would have received had he remained in the service until expiration of the period of the annual … leave”. Not a valuation of the leave — the pay you would have drawn while taking it.
hourly rate = round( annual rate ÷ 2,087, to the cent )
payment = Σ ( hours falling on each projected workday × the rate in force that day )
The period is projected over a calendar, not multiplied
5 CFR 550.1204(a) says the agency must project the leave period “beginning on the first workday (counting any holiday) occurring after the date the employee becomes eligible … and counting all subsequent workdays and holidays until the expiration of the period of annual leave”. Two consequences follow, and they run in opposite directions.
A federal holiday falling inside the period is a day of leave consumed, not a day of leave saved — so no holiday calendar changes the total, and this calculator keeps none. But the period “must not be extended by any holidays under 5 U.S.C. 6103 … which occur immediately after” you become eligible, so separating the day before a holiday does not buy you a free day either. The same sentence excludes donated leave, compensatory time off and credit hours from the projection: those are not annual leave and are not paid this way.
The projection is why the payment is a calendar question at all. 448 hours is 56 workdays — separate on 31 December 2026 and the balance does not run out until 19 March 2027, nearly three months later. You are not employed for any of it. Employment ended at separation, and 5 CFR 550.1205(e) confirms no further leave accrues over the period.
The hourly rate is rounded before it is multiplied
5 CFR 550.1205(a) is exact about this: convert the annual rate “by dividing the annual rate of pay by 2,087 (or 2,756 for firefighters, if applicable) and rounding it to the nearest cent, counting one-half cent and over as the next higher cent”. The rounding happens to the rate, and the rounded rate is what gets multiplied — so a calculator that divides at full precision and rounds the total at the end can be a few dollars out against your agency’s figure.
The firefighter divisor is not a rounding difference. A firefighter whose regular tour of duty includes overtime hours has a 2,756-hour work year, so the same annual salary produces a materially lower lump-sum hourly rate — about 24.27% lower. Our special provisions calculator covers the retirement that goes with that tour.
What January’s raise is actually worth
5 CFR 550.1205(b)(2) includes any statutory pay adjustment “that become[s] effective during the lump-sum leave period”, and directs the agency to “adjust the lump-sum payment to reflect the increased rate on and after the effective date”. On and after. The hours projected before it stay at the old rate.
The annual raise takes effect on the first day of the first pay period beginning on or after 1 January — 10 January 2027 for 2027 — which is why the advice to retire in late December circulates every year. It is sound advice with an inflated price tag. On the worked example above, a 2% adjustment is worth $420.00 on a $24,034 payment, because 48 of the 448 hours fall before 10 January 2027 and are paid at the old rate. Quoting 2% of the whole balance gives $472.28, which is 12.45% too high.
Keep that figure next to what the date itself can do. A separation date one day out of place moves your annuity commencing date by a whole month, which is worth far more than the raise on a leave balance — the best retirement date calculator ranks candidate dates on all five rules at once, including this one.
What is withheld, and what is not
Nothing comes out of this payment for retirement, health insurance, life insurance or the TSP. 5 CFR 550.1205(f) exempts it from deductions under chapters 83 and 84 (CSRS and FERS), chapter 89 (FEHB), chapter 87 (FEGLI) and the Thrift Savings Plan. You cannot shelter any of it in the TSP, and none of it counts toward your high-3 average salary or your creditable service.
Tax is a different matter. The payment is wages. IRS Publication 15, section 7, treats vacation pay as supplemental wages: paid separately from regular wages, it is withheld for federal income tax at a flat 22%. FICA applies on top — 1.45% Medicare on all of it with no wage base, plus 6.2% Social Security on any part still under the $184,500 2026 contribution base, plus 0.9% Additional Medicare tax on wages above $200,000. A CSRS employee is not in covered employment and pays the Medicare part only.
The 22% is withholding, not tax. This is the figure that surprises people, and it usually surprises them in the wrong direction. A lump sum arriving on top of a full year of federal salary is taxed at your marginal rate on the return, and for most people retiring mid-career-grade that rate is above 22%. The flat rate has then under-withheld, and the difference comes due at filing rather than back as a refund. Our annuity tax calculator does the equivalent arithmetic for the pension that starts afterwards.
What this does not model
- Your balance on the day you leave. Enter the balance you expect to hold at separation, not today’s. Leave you take between now and then is leave you do not cash out, and leave above your carryover ceiling is forfeited if the leave year turns first — the ceilings are 30 days (240 hours); 45 days (360 hours); 90 days (720 hours). The best retirement date calculator handles the forfeiture question; this page assumes the balance you enter survives to your last day.
- Premium pay, differentials and allowances.5 CFR 550.1205(b) adds several to the payment where they were actually payable — night differential for prevailing rate employees, standby and availability pay, supervisory differentials, Border Patrol overtime supplements, and nonforeign and foreign area allowances. This calculator takes a single annual rate of basic pay including locality, so anyone drawing those will be paid more than it shows.
- A within-grade increase you have already earned. 5 CFR 550.1205(b)(4) includes a step increase if you met the waiting-period requirements before you became eligible for the payment. Raise the annual rate you enter to the post-increase figure if that applies to you.
- A part-time or uncommon tour. The projection consumes eight hours a day. A part-time employee’s balance would run over more calendar days, which changes nothing about the total unless a pay adjustment falls inside the period — then the split between old and new rate moves.
- What you actually owe in tax. The withholding shown is what comes off the payment under the flat supplemental rate. Your liability depends on your whole year, your filing status and your other income, and is settled on your return.
- Unused sick leave. It is never paid out. It converts to creditable service instead, which is worth more over a long retirement than a cheque would be.
Sources
- 5 U.S.C. § 5551 — the entitlement, and the standard that the payment equals the pay you would have received had you remained in service through the leave.
- 5 CFR 550.1204 — projecting the lump-sum leave period over workdays and holidays, and what may not extend it.
- 5 CFR 550.1205 — the 2,087 and 2,756 divisors and the rounding rule (a); the pay adjustments applied on and after their effective date (b)(2)–(4); the types of premium pay included (b)(5)–(9); and the exemption from CSRS, FERS, FEHB, FEGLI and TSP deductions (f).
- 5 U.S.C. § 6304 — the annual leave accumulation ceilings that decide how large a balance you can carry to your last day.
- OPM — Lump-Sum Payments for Annual Leave — OPM’s own fact sheet on the payment and what it includes.
- IRS Publication 15 (2026), section 7 — supplemental wages and the flat 22% withholding rate.
Last reviewed: August 2026
Frequently asked questions
How is a federal annual leave lump sum payment calculated?
Your annual rate of basic pay is divided by 2,087 and rounded to the nearest cent to give an hourly rate, and your leave balance is then projected forward over workdays and holidays from the first workday after you separate. Every hour is paid at the rate in force on the day it falls. That is the same as hours times your hourly rate except when a pay adjustment takes effect inside the projected period — then the balance splits at the effective date, and only the hours on and after it are paid at the higher rate.
Is it worth retiring in December to get the pay raise on my annual leave?
It is worth something, and less than it is usually quoted as being worth. On the example this page opens on — 448 hours at $52.71 an hour, separating 31 December 2026 with a 2% adjustment effective 10 January 2027 — the adjustment adds $420.00 to a $24,034 payment. Applying 2% to the whole balance would say $472.28, because 48 of the hours are projected before the effective date and paid at the old rate. It is real money, and it is smaller than what the commencing date can cost if you get the day wrong.
How much tax is taken out of an annual leave payout?
A lump-sum leave payment is supplemental wages, so when it is paid separately from your regular salary it is withheld for federal income tax at a flat 22%, plus Medicare at 1.45%, plus Social Security at 6.2% on any part still under the $184,500 wage base, plus state tax if your state taxes it. That usually lands near 30% in total. But 22% is a withholding rate, not a tax rate: the payment is added to a whole year of federal salary on your return, so if your marginal rate is higher the flat rate has under-withheld and the difference is due at filing.
Can I roll my annual leave lump sum into the TSP?
No. 5 CFR 550.1205(f) exempts the payment from deductions for CSRS, FERS, the Federal Employees Health Benefits program, FEGLI and the Thrift Savings Plan, so nothing can be withheld from it for the TSP and no agency match arises on it. The same rule is why the payment never counts toward your high-3 average salary or your creditable service — it is wages for tax, and not basic pay for retirement.
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