Learn how to calculate disposable income for an employee’s child support payments.
The following is a guide for calculating the amount of allowable disposable that may be garnished during a worker’s pay period.
Allowable disposable income is calculated by multiplying a worker’s disposable income by the CCPA percentage limit. (Allowable Disposable Income = Disposable Income x CCPA % Limit)
Allowable disposable income is the most a worker’s wages may be garnished. The amount that can be garnished is dependent on disposable income and the Consumer Credit Protection Act (CCPA) percentage limit. This in effect sets a maximum limit on the percentage that may be garnished in a pay period.
CCPA % limit is an amount determined at a federal level and sets the maximum percentage that may be garnished.
Disposable income is the portion of an worker’s paycheck that is subject to garnishments. Taxes and legally-required deductions don’t count towards disposable earnings. Voluntary deductions such as 401(k) contributions and health and life insurance are generally considered part of disposable income. These restrictions may vary by state; each court order for child support should cite any applicable state regulations. (Disposable Income = Gross Pay – Allowable Deductions)
Wages that are eligible for garnishments include any normal pay, as well as any commissions or bonuses a worker may receive.
Determine disposable income
You may use the table below to help determine a worker’s disposable income.
Directions for calculating disposable income:
- Enter the gross pay in box 1
- Enter the amount of each allowable deduction in boxes 2 – 7
- Enter the sum of boxes 2 – 7 in box 8
- Subtract line 8 from line 1 and enter the amount in box 9.
- The amount in line 9 is the disposable income
1 Gross pay 2 Federal Income Taxes 3 Social Security and Medicare taxes 4 State taxes 5 City/Local taxes 6 Health insurance premiums* 7 Involuntary retirement or pension plan payment* 8 Allowable deductions (Add lines 2 through 7) 9 Disposable Income (Subtract line 8 from line 1)
- *If allowed by the garnishment order, or work state regulation.