Disposable Earnings: What It Means for Employers

What it means in practice

Disposable earnings is a payroll calculation, not a line on most pay stubs. It sits between gross pay and net pay: start with what the employee earned for the pay period, subtract the withholdings the law requires, and stop there. The figure matters whenever an employer receives a garnishment order, because Title III of the Consumer Credit Protection Act (CCPA) expresses its limits as percentages of disposable earnings and as dollar amounts of disposable earnings that must be left untouched (15 U.S.C. 1673). This page focuses on getting the base number right; the garnishment page covers orders, priorities and employee protections more broadly.

Who is covered. The Department of Labor says the CCPA garnishment provisions apply in all 50 states, the District of Columbia and all U.S. territories and possessions, and protect everyone who receives personal earnings (DOL Fact Sheet #30). The Wage and Hour Division's Field Operations Handbook (FOH) adds that there is no exemption for federal, state or local government employees, and that an employee cannot waive the protections, because the statute bars courts and states from enforcing any order that violates it (FOH 16a02 and 16a05; 15 U.S.C. 1673(c)).

Step 1: Identify earnings for the pay period. Earnings are "compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise," including periodic pension or retirement payments (15 U.S.C. 1672(a)). The FOH treats sick and vacation pay, payments from an employment-based disability plan, and service charges an employer adds to a customer bill and pays to staff as earnings. If an employment contract includes meals or lodging, their dollar value is part of earnings (FOH 16a06, 16a10, 16a11 and 16b04(c)). For tipped employees, only the cash wage and any tip credit claimed count; tips above that are excluded (DOL Fact Sheet #30). An employer's HSA contribution is generally not earnings if it is not based on the value of the employee's services and no cash option is offered (FOH 16a12).

Lump sums. The test is whether the payment is for the employee's services, not how often it is paid. The FOH lists commissions, discretionary and nondiscretionary bonuses, profit sharing, referral and sign-on bonuses, relocation incentives, attendance and safety awards, retroactive merit increases, holiday pay, wage-replacement workers' compensation, final pay including accrued vacation, and severance as earnings for the pay period in which they are received. Workers' compensation medical reimbursements, compensatory or punitive damages in settlements, and proceeds from company share buybacks are not earnings (FOH 16b04(d)). See supplemental wages for how these payments are taxed.

Step 2: Subtract only deductions required by law. The FOH lists federal income tax withholding, Social Security and Medicare taken from the employee (FICA), the employee share of state unemployment insurance tax, state and municipal income taxes, and withholding for state or federal employee retirement systems required by law (FOH 16b02(b)). Use the tax actually withheld as shown on payroll, even if the employee claimed less on a Form W-4 than they could have (FOH 16b02(c)).

Step 3: Leave voluntary deductions in. A deduction the employee elected must stay in the figure. The FOH examples are medical and hospital insurance premiums, union dues and initiation fees, savings bonds, salary advances, charitable contributions, board and lodging, employer stock purchases, wage assignments not made under a judgment, retirement plan contributions not required by law, credit union loan payments, uniform rentals, and the employer's own attorney fees or garnishment service fees where state law allows them (FOH 16b02(d), 16b05 and 16b08). For federal employees, OPM regulations treat health premiums and voluntary Thrift Savings Plan deductions as required by law, so they are subtracted. Every one of these items still comes out of the check as a payroll deduction; they simply do not shrink the garnishment base.

Step 4: Apply the limit for the pay period. Run two tests and use the smaller result: 25% of disposable earnings, and disposable earnings minus 30 times the federal minimum wage in effect on the date the pay is payable (15 U.S.C. 1673(a)). That smaller figure caps all ordinary garnishments combined. DOL lists the federal rate as $7.25 an hour, effective July 24, 2009. For longer pay periods, 29 CFR 870.10(c) multiplies the weekly figure by the number of workweeks, treating a month as 4 1/3 weeks. DOL's table at the current rate (checked October 2026) protects all disposable earnings up to $217.50 a week, $435.00 every two weeks, $471.25 twice a month or $942.50 a month; the 25% test becomes the controlling one once disposable earnings reach $290.00, $580.00, $628.33 or $1,256.66 for those periods. The dollar tables printed in 870.10 still show 1991 amounts.

How the period is measured. For periods longer than a week, the test runs on the whole pay period, not each workweek inside it (FOH 16b04(a)). The protected floor is not prorated for a partial week or a final check (FOH 16b03(c)). Earnings from separate pay periods held back and paid together are tested period by period, and a commission settlement is tested separately from the weekly draws already paid against it (FOH 16b04(b) and 16b10). Two unrelated employers each apply the limits to their own pay (FOH 16b11).

Example 1: weekly pay. A Remindax illustration with assumed figures: gross pay is $900. Required withholdings are $62.00 federal income tax, $68.85 Social Security and Medicare, and $28.00 state income tax, a total of $158.85. The employee also elects a $54 401(k) deferral, a $40 medical premium and $12 union dues. Disposable earnings are $900.00 - $158.85 = $741.15; the $106 of voluntary items is ignored. For an ordinary creditor, 25% is $185.28 (rounded down) and the excess over $217.50 is $523.65, so the cap is $185.28. Subtracting the voluntary items would give a $635.15 base and a $158.78 cap. Applying 25% to gross pay would give $225.00, which exceeds the CCPA limit; the FOH notes that amounts withheld beyond the CCPA are not counted as wages paid under the FLSA (FOH 16b09).

Example 2: biweekly part-time pay. An employee earns $560 gross over two weeks, with $48.84 of required withholdings, leaving $511.16 of disposable earnings. That is above $435.00 but below $580.00, so only the excess, $76.16, may be garnished, even though 25% would be $127.79.

Example 3: semimonthly pay with a bonus and a support order. A salaried employee receives $2,000 plus a $500 bonus in one semimonthly check. With $420 of required withholdings, disposable earnings are $2,080, and an ordinary creditor could take up to 25%, or $520. A support order can reach 50% ($1,040) if the employee supports another spouse or child, 60% ($1,248) if not, and 5 points more for support owed for a period before the most recent 12 weeks (15 U.S.C. 1673(b)(2)). If $600 is already withheld for support with priority, nothing is left for the ordinary creditor, because $600 exceeds $520; DOL Fact Sheet #30 and FOH 16b12 work through the same logic. If support were $400, the CCPA would leave room for $120 more.

Example 4: monthly pay. Monthly disposable earnings of $1,100 fall between $942.50 and $1,256.66, so the maximum for an ordinary debt is $157.50, not 25% ($275).

A different base for federal agency and student loan orders. Treasury's administrative wage garnishment rule defines "disposable pay" as compensation remaining "after the deduction of health insurance premiums and any amounts required by law to be withheld," and says court-ordered withholding is not an amount required by law (31 CFR 285.11(c)). The Department of Education uses the same definition (34 CFR 34.3). Withholding under these orders is capped at whichever is smaller: the amount the order states (no more than 15% of disposable pay) or disposable pay above the 30-times-minimum-wage floor (31 CFR 285.11(i)(2); 34 CFR 34.19). In Example 1, disposable pay would be $741.15 - $40 = $701.15, and 15% is $105.17. When an order served earlier, or a family support order served at any time, is already being paid, the agency may receive only what remains of 25% of disposable pay after those amounts (31 CFR 285.11(i)(3); 34 CFR 34.20).

Child support orders. Federal law requires state income withholding for support to stay within the 1673(b) percentages, including any employer fee the state allows, and defines income broadly as any periodic payment, including wages, commissions, bonuses, workers' compensation and pension payments (42 U.S.C. 666(b)(1) and (8)). When the order comes from a different state, the law of the employee's principal place of employment governs the maximum amount, the fee, the timing and priorities among multiple support orders (42 U.S.C. 666(b)(6)(A)). Because states may define the support base differently, read the order and the state rules it cites.

IRS levies work differently. The CCPA percentages do not limit garnishment for a federal or state tax debt (15 U.S.C. 1673(b)(1)(C)). The IRS instead exempts a table amount of take-home pay based on filing status and dependents: for 2026, a single employee paid weekly with no dependents keeps $309.62 (IRS Publication 1494). The Internal Revenue Manual says a levy legally attaches to gross income minus the exempt amount, but by policy reaches only the usual take-home pay, so deductions already in place when the levy arrives generally continue, while new voluntary deductions generally should not be added without IRS approval (IRM 5.11.5.4.5). In Example 1, take-home pay of $635.15 less $309.62 would leave $325.53 for the IRS.

Where states differ (examples). Federal law yields to state rules that take less, and DOL says the law resulting in the lower garnishment must be observed (DOL Fact Sheet #30). California's court guide for employers defines disposable earnings the same way, but caps an ordinary earnings withholding order at the smaller of two figures: 20% of disposable earnings, or 40% of whatever exceeds the applicable minimum wage times 48 for weekly pay, 96 biweekly, 104 semimonthly or 208 monthly, using the state or a higher local rate. With the 2026 state minimum of $16.90 an hour (California DIR), the weekly floor is $811.20, so the employee in Example 1 would have nothing withheld under a California order. New York CPLR 5231 caps an income execution at 10% of gross income, 25% of disposable earnings, or the excess over 30 times the higher of the federal or state minimum wage, whichever is least; in Example 1 the 10% figure, $90, would usually control. Check your own state through the DOL list of state labor offices.

Is disposable earnings the same as net pay? No. Net pay also removes voluntary deductions, so disposable earnings under the CCPA are usually higher. Do mandatory retirement contributions count as required by law? Only where a law requires them, such as a state or federal employee retirement system; a 401(k) election does not qualify (FOH 16b02). Does a final paycheck get a smaller floor? No; the floor is not prorated (FOH 16b03(c)). Do earnings already deposited in the bank keep CCPA protection? The FOH says the limits do not apply to a bank account of earnings already received (FOH 16a09). For a specific order, the issuing court or agency, the Department of Labor or a qualified professional can confirm the amount.

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