Income Tax: Do You Need to Declare Your Retirement Severance or Bonus?

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Did you receive a severance package or bonus upon retirement? You may be wondering whether these payments are taxable and need to be declared. The answer depends on the nature of your departure. Here’s what you need to know.

Are Retirement Severance Payments Taxable?

The tax treatment of retirement payments varies based on how you retired.

If You Retired Voluntarily

If you chose to retire outside of a collective redundancy plan, your retirement severance or bonus is fully taxable. These amounts must be declared as salary income in your tax return for the year following receipt.

However, if your retirement was part of a social or collective redundancy plan, the full amount of the severance you received is exempt from income tax. In this case, you do not need to report it.

If You Were Retired by Your Employer

When retirement is initiated by your employer, any compensation received may benefit from a partial or full tax exemption—but only up to certain limits defined by law, collective bargaining agreements, or professional agreements.

According to the French tax authority website (impots.gouv.fr), only the portion that exceeds the exempt amount is taxable. The exempt portion corresponds to the highest of the following three amounts:

  • The full legal or contractual severance amount,

  • 50% of the total severance received, capped at five times the annual Social Security ceiling (€231,840 in 2024),

  • Twice your gross annual salary from the previous year, also capped at €231,840 in 2024.

In most cases, this income is already included in your pre-filled tax return. If not, you are responsible for manually declaring the taxable portion in the appropriate section (details below).

What About Social Contributions?

The application of social charges also depends on how you retire:

  • Voluntary retirement (outside of a redundancy plan): Severance is fully subject to social security contributions, CSG, and CRDS.

  • Voluntary retirement under a redundancy plan: Social security charges are fully waived, while CSG and CRDS are only partially applied.

  • Employer-initiated retirement: Contributions may be partially waived depending on the amounts received.

How to Declare Your Retirement Severance

Unless your retirement is part of a social plan (in which case you’re fully exempt), your severance must be reported on your income tax return for the year after it was paid.

If your severance is not pre-filled, you must:

  • Enter the gross amount in box 0XX of form 2042 C (complementary income form), separately from other income;

  • Subtract the severance amount from the total pre-filled income (since it’s already included in your total income);

  • In the section “Exceptional or Deferred Income – Taxed Using the Quotient System” of form 2042, indicate the nature and amount of the severance for each member of the household who received such income during the year.

Early Retirement: Tax Rules Also Depend on Departure Conditions

Just like regular retirement, early retirement severance is treated differently depending on whether your work contract is terminated.

If Early Retirement Involves a Contract Termination

  • Under a redundancy plan: Severance for early retirement is fully tax-exempt.

  • Outside of a redundancy plan: Severance is fully taxable as salary income.

Special Case: “Amiante” Early Retirement Program

Severance and additional payments made under the asbestos-related early retirement program are entirely tax-exempt.

If There’s No Contract Termination (e.g. Phased Early Retirement)

When the employment contract continues (as in phased retirement schemes), any severance received is fully taxable.