17 Aug I retired. Why was money from unused sick days taxed?

Q. I just received my unused sick days check from my school district after 43 years of service. Why was money deducted for Social Security, Family Leave insurance, Medicare, federal and state taxes, and state unemployment insurance? All these deductions added up to over $1,000. Since this money was earned after I retired, why is it taxed? It was earned after retirement, not while I was working.
— Wronged?

A. Congratulations on your retirement.

The key word here is “earned.”

Any earned income is taxable at ordinary income rates, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

“It really doesn’t matter when that income was earned,” he said. “In your case, the ‘benefit’ accumulated during your 43 years was not treated as taxable income until it was paid out as ‘unused sick days,’ thus, it was earned at that time.”

Enjoy your retirement!

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This story was originally published on Aug. 17, 2021.

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