09 Jul Do I owe taxes on a lump sum from unused paid time off?

Q. I retired from the City of Jersey City on May 1, 2020. I paid into the city pension for 37 years and did not pay into Social Security. Before that job, I did pay in from 1974 through 1985 so I am eligible for benefits. However, as part of my retirement package I will receive a one time buyout payment of $20,250 and $17,000 in unused paid time off. I’m told taxes, including Social Security, will be taken out. Is that right?
— Getting out

A. It does seem right.

Paid time off for vacation, sick days, holidays and other purposes are considered to be supplemental wages, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

That means it would generate income to you, she said.

“Therefore, it would be taxable to you as the employee and deductible to your employer, Jersey City, and will be such on your W-2,” she said.

Email your questions to .

This story was originally published on July 9, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.