Guide
What Comes Out of Your Annual Leave Lump Sum
Annual leave lump sums are paid gross. A $100,000 FERS salary and 240 hours leaves $8,090.81 of $11,500.80 after 22%, Social Security and Medicare.
Your annual leave lump sum is paid gross, and about 29.65% of a typical FERS payout never reaches your account: 22% federal income tax withholding, plus Social Security and Medicare tax on top. Most people expect to lose 22%. The extra 7.65% is the part that surprises them.
The Annual Leave Lump Sum Calculator projects the payment and subtracts each withholding line. This guide shows what each line is, the rule behind it, and one worked payout carried to a dollar figure.
What the payment is
When you separate, 5 U.S.C. § 5551(a) pays you for unused annual leave. The amount is the pay you would have received had you stayed in service through the projected leave period. 5 CFR 550.1204 counts that period forward over workdays and holidays from the day after separation.
The hourly rate comes from 5 CFR 550.1205(a): divide your annual rate of pay by 2,087 (2,756 for firefighters, if applicable) and round to the nearest cent, counting one-half cent and over as the next higher cent. The rounding happens to the rate, before it is multiplied by your hours.
Leave stops accruing over this period: "An employee may not earn leave for the period covered by a lump-sum payment" (5 CFR 550.1205(e)).
What is not deducted
5 CFR 550.1205(f) says a lump-sum payment is not subject to deductions for CSRS or FERS retirement, FEHB premiums, FEGLI premiums or TSP contributions. If your paycheck carries those deductions, they do not come out of this payment.
What is withheld
The calculator treats the payment as supplemental wages, so three lines come out. The rates and the 2026 wage base are in IRS Publication 15 (2026).
| Line | Rule |
|---|---|
| Federal income tax | "Withhold a flat 22% (no other percentage allowed)" |
| Social Security | 6.2%, up to a wage base of $184,500 |
| Medicare | 1.45%, with an Additional Medicare Tax of 0.9% on wages over $200,000 in a calendar year |
Two cautions. First, 22% is a withholding rate, not what you owe: the payment is added to your income for the year, and your return settles the real tax. Second, Social Security tax stops once your year-to-date wages reach the wage base, so a payment landing late in a high earner's year can carry less of it.
A worked example
A FERS employee earns $100,000 a year and separates with 240 hours of annual leave, the carryover ceiling for most employees under 5 U.S.C. § 6304(a). This example assumes no pay adjustment falls inside the projected period, and that year-to-date wages are low enough that the payment stays under both the $184,500 wage base and the $200,000 threshold.
- Hourly rate: $100,000 ÷ 2,087 = $47.9157, rounded to $47.92.
- Gross payment: 240 hours × $47.92 = $11,500.80.
- Federal withholding at 22%: $2,530.18.
- Social Security at 6.2%: $713.05.
- Medicare at 1.45%: $166.76.
- Total withheld: $2,530.18 + $713.05 + $166.76 = $3,409.99, which is 29.65% of the gross.
- Net: $11,500.80 − $3,409.99 = $8,090.81.
Someone who subtracts only the 22% expects $8,970.62. The check is $879.81 lower, which is the $713.05 of Social Security and $166.76 of Medicare. State income tax withholding, where your state applies it, comes out of the same payment and is not in these figures.
What this guide does not cover
It does not cover the January pay adjustment inside the projected period, which raises the rate on and after its effective date under 5 CFR 550.1205(b)(2). It does not cover the tax you finally owe, state withholding rules, or the carryover ceilings above 240 hours. For the calendar side of leave and retirement dates, see The Leave Year Trap: Retiring in January.
This guide is informational only and is not financial, tax, or legal advice. Last reviewed: October 2026.
Frequently asked questions
Is an annual leave lump sum subject to Social Security tax?
For the calculator's FERS case, yes: it applies 6.2% up to the 2026 wage base of $184,500, per IRS Publication 15 (2026). Once your year-to-date wages reach that base, no more Social Security tax is withheld.
What federal income tax rate is withheld from the payment?
The calculator withholds a flat 22%, the supplemental wage rate in IRS Publication 15 (2026). That is a withholding rate; your actual tax is settled on your return.
Do FERS, FEHB, FEGLI or TSP deductions come out of the lump sum?
No. 5 CFR 550.1205(f) says the payment is not subject to deductions for CSRS or FERS retirement, FEHB, FEGLI or TSP contributions.
How is the hourly rate for the payment worked out?
Under 5 CFR 550.1205(a), your annual rate of pay is divided by 2,087 (2,756 for firefighters, if applicable) and rounded to the nearest cent before it is multiplied by your hours.
Sources
This guide is informational only. It is not financial, tax, or legal advice, and FedAnnuity is not affiliated with OPM or the U.S. government. Retirement rules turn on the specific facts of a career, and only your agency and OPM can give you a binding figure.
Last reviewed: October 2026 · Against primary sources cited in the body.