PTO Cashout Value Calculator
PTO (Paid Time Off) accrued but unused often pays out at separation — but only if state law or employer policy requires it. California, Colorado, Illinois, Massachusetts, Montana, Nebraska, and a dozen others mandate payout. Other states allow forfeiture.
Which States Mandate PTO Payout
Required by statute: California, Colorado, Illinois, Massachusetts, Montana, Nebraska, North Dakota, Rhode Island. Required by case law: New York. Mandate applies regardless of employer policy. Other states permit 'use-it-or-lose-it' if disclosed in writing. Federal law (FLSA) does not require payout.
Tax Treatment Of PTO Cashout
IRS treats PTO cashout as supplemental wages. Standard withholding: 22% federal flat (up to $1M cumulative supplemental income that year), 37% above $1M. State withholding varies. FICA (7.65%) always applies. Some employees ask to spread PTO over final paychecks to avoid the 22% flat rate — usually denied.
Use It Or Cash Out Decision
Federal employees and some private-sector employees can carry over PTO. Cashing out triggers immediate tax. Using PTO instead defers compensation as paid time off. If retirement is within 6 months and PTO will boost final-average-salary pension calculation, using PTO often nets more value than cashout.
Source: FLSA Section 7(o), California Labor Code §227.3, IRS Publication 15. Last updated: May 2026.