How to Calculate a Wage Garnishment Amount

Wage garnishment is a legal process where an employer withholds a portion of an individual’s earnings to pay a debt. This action typically occurs due to a court order, though certain government agencies can initiate garnishments without one. Understanding these calculations helps individuals navigate financial implications.

Determining Disposable Earnings

Disposable earnings represent the portion of an individual’s gross pay remaining after legally mandated deductions. These required deductions include federal, state, and local income taxes, as well as the employee’s share of Social Security and Medicare taxes. Legally required employee retirement contributions are also subtracted.

To calculate disposable earnings, an employer starts with the individual’s total gross pay, which includes wages, salaries, bonuses, and commissions. From this gross amount, only the legally required deductions are subtracted. Voluntary deductions, such as health insurance premiums, retirement contributions not required by law, union dues, or charitable contributions, are not considered. The resulting figure is then subject to garnishment limits.

Federal Limits on Wage Garnishment

Federal law sets limits on how much of an individual’s earnings can be garnished for most debts. This law protects a portion of an individual’s disposable earnings from being taken by creditors. It applies to all types of earnings, including wages, salaries, commissions, and bonuses.

For general garnishments, such as those for consumer debts, the maximum amount that can be withheld in any workweek is the lesser of two figures. The first limit is 25% of an individual’s disposable earnings for that week. The second limit is the amount by which an individual’s disposable earnings for that week exceed 30 times the federal minimum wage. The federal minimum wage is currently $7.25 per hour.

To illustrate, if an individual’s weekly disposable earnings are $200, the first limit would be $50 (25% of $200). The second limit would be $200 minus 30 times the federal minimum wage ($7.25 x 30 = $217.50), which results in a negative number, meaning no garnishment is allowed under this rule. In this scenario, the lesser amount is $0, so no wages would be garnished.

If weekly disposable earnings are $400, the first limit is $100 (25% of $400). The second limit is $400 minus $217.50, which equals $182.50. The lesser of $100 and $182.50 is $100, so $100 would be the maximum amount garnished. These limits apply regardless of how many garnishment orders an employer receives for general debts.

State-Specific Wage Garnishment Rules

While federal law establishes baseline protections for wage garnishment, individual states retain the authority to enact their own laws. These state laws can offer greater protection to debtors. If a state’s garnishment limits are more favorable to the individual, those state limits supersede federal limits.

For instance, a state might set a lower maximum percentage of disposable earnings that can be garnished or a higher protected amount based on the state’s minimum wage. Individuals should consult their specific state’s laws to understand the exact limits that apply to their earnings.

Special Garnishment Types and Their Calculation

Certain types of debts have different garnishment rules and higher limits than general consumer debts. These special garnishments are often exempt from the standard federal CCPA limits.

Child Support and Alimony

For child support and alimony, higher percentages of disposable earnings can be garnished. Federal law permits garnishment of up to 50% of an individual’s disposable earnings if they are supporting another spouse or child. This limit increases to 60% if the individual is not supporting another spouse or child. An additional 5% may be garnished if support payments are 12 weeks or more in arrears, potentially raising the maximum to 55% or 65%.

Federal Student Loans

Federal student loans, when in default, are subject to administrative garnishment. The Department of Education or its collection agencies can garnish up to 15% of an individual’s disposable earnings to repay defaulted federal student loans. This can occur without a court order.

Federal Taxes

The Internal Revenue Service (IRS) has unique powers to levy wages for unpaid federal taxes. An IRS wage levy does not require a court order. The amount the IRS can take is determined by the individual’s filing status, standard deduction, and the number of dependents claimed, using specific tables provided in IRS Publication 1494. The individual is typically given a Statement of Dependents and Filing Status to complete, which helps determine the exempt amount.