Leaving a job
How your final paycheck works in 2026
Your final paycheck when you resign, retire, or are terminated typically has two components: prorated salary for the days you worked in the last pay period, and a PTO payout for accrued, unused vacation (where required by state law or company policy). Both are subject to normal payroll taxes.
Prorated salary component
The prorated portion is calculated by dividing your annual salary by 260 work days to get a daily rate, then multiplying by the days you actually worked in the final period. An employee earning $75,000 per year with a daily rate of $288.46 who works 8 of 22 work days in their last month receives $2,307.69 in prorated salary. See our prorated salary calculator for a deeper look at this calculation.
PTO payout component
If your state requires PTO payout or your employer's policy grants it, your unused vacation hours are converted to cash at your regular hourly rate ($75,000 / 2,080 = $36.06/hr). Forty unused PTO hours would add $1,442.31 to your final check. The PTO portion is typically withheld at the 22% federal supplemental rate, while the prorated salary uses your normal W-4 withholding. See our PTO payout calculator for the full breakdown.
| Salary | 8-day prorated | 40 PTO hrs | Final gross |
|---|---|---|---|
| $55,000 | $1,692 | $1,058 | $2,750 |
| $75,000 | $2,308 | $1,442 | $3,750 |
| $90,000 | $2,769 | $1,731 | $4,500 |
| $120,000 | $3,692 | $2,308 | $6,000 |
Gross final paycheck = 8 work days prorated + 40 unused PTO hours. Net is lower after tax withholding.
Other items in a final paycheck
Beyond prorated salary and PTO, a final check may include unpaid commissions, earned bonuses, expense reimbursements, and any remaining pre-tax deductions (health insurance, 401(k)). If you received a signing bonus or relocation bonus with a clawback clause and leave before the required period, the repayment amount may be deducted from the final check where state law allows.
Questions
Final paycheck calculator FAQ
How is a final paycheck calculated?
A final paycheck includes prorated salary for days worked in the last pay period, plus any accrued and unused PTO that your state or employer policy requires to be paid out. The prorated portion is your daily rate (annual salary divided by 260) times the days worked. The PTO payout is your hourly rate times unused PTO hours. Both amounts are subject to normal tax withholding.
When must an employer issue a final paycheck?
It depends on the state. California requires the final check on the last day of work if terminated, or within 72 hours if the employee quits without notice. Colorado, Illinois, and several other states require same-day or next-day payment upon involuntary termination. Many states default to the next regular payday. Check your state labor department for the specific deadline.
Does a final paycheck include unused PTO?
In states that mandate PTO payout — including California, Colorado, Illinois, Montana, and Massachusetts — yes, accrued and unused vacation must be included in the final paycheck. In other states, it depends on the employer's written policy. If the policy promises payout, the employer must honor it.
Are final paychecks taxed at a higher rate?
Not inherently. Regular prorated wages are withheld at your normal W-4 rate. If a PTO payout is paid as a separate supplemental check, the employer may withhold federal tax at the flat 22% rate. Either way, your actual tax liability is calculated on your full-year income when you file.
What deductions come out of a final paycheck?
Standard deductions still apply: federal and state income tax, Social Security (6.2% up to $184,500 in 2026), Medicare (1.45%), and any pre-tax benefits like health insurance or 401(k) that cover the pay period. Post-tax deductions like Roth contributions or garnishments also continue through the final check.
- Sources: State labor department final-pay statutes · IRS Rev. Proc. 2025-32 (22% supplemental withholding) · SSA 2026 wage base $184,500.
- 🔄 Last updated July 25, 2026 · Tax year 2026
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