NOTE:  Miscellaneous itemized deductions, which previously would have been subject to the 2% of adjusted gross income limitation, have been eliminated by 2018 Tax Cuts and Jobs Act (TCJA).  This elimination affects Tax Years 2018 through 2025.

The answer below applies to 2017 deductions.

If the severance pay is taxable, then you can deduct these expenses on line 23 of Schedule A, "Other expenses."  These are deductible as amounts you paid to produce or collect taxable income.  

However, to get any benefit, you have to 

1.    Itemize your deductions on Schedule A, and have enough itemized deductions (i.e., medical expenses, mortgage interest, property taxes, charitable contributions, etc.) to exceed the Standard Deduction for your filing status, and 

2.    Have enough “Job Expenses and Certain Miscellaneous Deductions” on Schedule A to exceed 2% of your Adjusted Gross Income.  For example, if your Adjusted Gross income is $50,000, the 2% limitation means that you need total expenses of more than $1,000 (i.e., $50,000 times 2%) to see any reduction in your taxes. 

Due to these limitations, it's possible that you may not see any benefit by taking this deduction.

For more information, see the line 23 instructions in 2017 Instructions for Schedule A. 

[Edited 3|17|2020 8:55 am]