Comprehensive Guide
Learn more in our Personal Finance Guide.
How it works
A PTO cash-out converts banked vacation hours into a final paycheck amount — hours times your hourly rate, taxed as supplemental wages. Whether the payout exists at all is decided by state law and company policy rather than federal rules: California, Colorado and roughly half the states treat accrued vacation as earned wages that must be paid at separation, while others permit use-it-or-lose-it forfeiture outright. The calculator prices three scenarios from one input set. Cash-out produces the headline figure — 68 banked hours at $28 an hour pays $1,904 gross, with 22–28% combined withholding leaving roughly $1,447 in hand. Forfeiture assigns the full $1,904 to the risk column, a number worth knowing two months before resigning rather than after. Mandatory-use policies change the strategy instead of the math: scheduling those same 68 hours during your notice period delivers identical pay while preserving health-insurance continuity and avoiding the lump-sum tax spike of a single fat check. Timing matters in every scenario because payouts stack onto final wages and can push withholding higher than your true bracket; like all supplemental withholding, over-collection returns at filing time. Employees planning an exit should snapshot their balance early, confirm the policy in writing, and let this valuation anchor the departure-date negotiation.Formula
Gross = PTO hours × hourly rate | After-tax = gross × (1 − tax%) | Days = hours ÷ 8
Tips
- Screenshot your PTO balance at resignation — payroll errors spike during separations.
- In payout-required states, employers cannot deduct forfeited balances from other checks.
- Using days during notice preserves benefits continuity that a cash-out does not.
- A lump-sum payout can bump withholding above your real bracket — expect a refund.
- Check accrual caps; some employers stop accruing once ceilings are hit.
Frequently asked questions
Does an employer have to pay out PTO when you quit?
Depends entirely on the state. California, Colorado, Illinois and many others classify accrued vacation as deferred wages requiring payment at separation; several others allow written use-it-or-lose-it policies to erase the balance. Company policy more generous than state law generally binds the employer to its own terms.
How is a PTO cash-out taxed?
As supplemental wages — most employers withhold a flat 22% federally plus FICA and state, so 68 hours at $28 pays $1,904 gross and roughly $1,447 net. Because the money stacks onto your annual income, any withholding above your true marginal bracket returns when you file.
Should I use my PTO before quitting or take the cash?
Financially similar — both pay the same wage for the hours. Using days during your notice keeps health coverage running and spreads taxation across checks, while cash-out delivers liquidity immediately but in one heavily withheld lump sum. If the balance would otherwise be forfeited, either path beats losing it.
Can an employer deny a PTO cash-out?
Where state law requires payout, no — denial is a wage claim waiting to happen. Where forfeiture is legal, employers may refuse cash-out yet still bar usage during notice, effectively erasing the balance. That combination is exactly why the at-risk value deserves checking before you announce a departure date.
How much is 68 hours of PTO worth?
At a $28 hourly rate, $1,904 gross — about $1,447 after typical supplemental withholding — equivalent to 8.5 eight-hour days. Salaried workers convert salary ÷ 2,080 into the hourly figure first; a $70,000 salary values those same 68 hours near $2,308.