Vacation Leave Payout

[jryanruss23]

I just changed jobs and will be paid out my vacation time at my per hour rate. Is this taxed as normal income or is this separate (i.e. bonus, etc.).

[BettieG · Accepted solution]

Thanks for your question @jryanruss23!  Unfortunately, accrued vacation pay will be taxed as ordinary income.  It may be reported to you as part of your W-2 or it may be reported to you separately by your employer on a Form 1099-MISC.  Either way, though, it's taxed as ordinary income unhappily.

I hope this is helpful!

[BonnieI]

Hi @jryanruss23 

Congratulations on your new job change.  Thanks for joining us at the TurboTax Live Event.  Yes, your vacation pay is earned income that will be included in your wages and Form W-2 for 2023.  Please use the W-4 Tax Calculator and the Tax Calculator to estimate your income and withholding for 2023.

W-4 Calculator | IRS Tax Withholding Calculator 2023-2024 | TurboTax

*** Tax Calculator - Refund & Return Estimator 2022-2023 | TurboTax® Official

Please use these tools to estimate your total tax liability for 2023.  You may need to change for withholding to avoid a balance due when filing your 2023 tax return.  There is a blank Form W-4 provided to make the necessary adjustments to your federal withholding and give to your employer.  

Below is a TurboTax guide entitled Form W-4 and your Take Home Pay

https://turbotax.intuit.com/tax-tips/irs-tax-forms/form-w-4-and-your-take-home-pay/L4VSEhPez

Thank you for using TurboTax Live and please reach out with any additional questions.

Bonnie

Quality Reviewer Tax Expert