Short answer: Disposable earnings are the part of an employee's pay that remains after deductions required by law are taken out. Under the federal Consumer Credit Protection Act (CCPA), garnishment limits apply to this figure, not to gross pay (15 U.S.C. § 1672(b)).
The federal definition
Title III of the CCPA defines disposable earnings as “that part of the earnings of any individual remaining after the deduction from those earnings of any amounts required by law to be withheld.” The key test is whether the law requires the deduction. A deduction the employee chose, however sensible, does not reduce disposable earnings.
Deductions that reduce disposable earnings, and those that don't
Legally required: subtract these
- Federal income tax withholding
- State income tax withholding
- Local, city or county income taxes
- Social Security (OASDI) and Medicare (FICA)
- Mandatory state disability or unemployment contributions (for example CA SDI, NJ SUI)
- Public-employee retirement contributions that a statute requires
Voluntary: do not subtract these
- 401(k), 403(b) and other voluntary retirement contributions
- Health, dental and vision premiums, even pre-tax Section 125 premiums
- Health savings (HSA) and flexible spending (FSA) accounts
- Life, accident and supplemental disability insurance
- Union dues, charitable giving and uniform deductions
- Repayment of payroll advances or employee loans
Worked example: weekly pay, ordinary creditor garnishment
An employee is paid weekly. Gross earnings are $1,250.00 and the legally required withholdings are shown below. The 401(k) and health premium the employee also pays do not change the result.
| Step | Amount |
|---|---|
| Gross earnings | $1,250.00 |
| Less federal income tax | −$115.00 |
| Less state income tax | −$57.50 |
| Less Social Security and Medicare (FICA) | −$95.63 |
| Disposable earnings | $981.87 |
| Test 1: 25% of disposable earnings | $245.47 |
| Test 2: disposable earnings above 30 × $7.25 ($217.50) | $764.37 |
| Maximum withholding (the lesser of the two tests) | $245.47 |
You can change any of these inputs, pay frequencies and states in the wage garnishment calculator, which starts with this same example. For the limits that apply to child support, student loans and tax levies, see federal garnishment limits by order type.
Common mistakes
- Subtracting voluntary deductions. Treating 401(k) or health premiums as “required” understates disposable earnings, so too little is withheld.
- Starting from gross pay. Applying the percentage to gross earnings withholds too much and can breach the federal cap.
- Using the weekly floor on a longer pay period. The 30× minimum-wage floor is multiplied for biweekly, semimonthly and monthly pay. See the pay-period table.
- Ignoring stricter state rules. Some states protect more of an employee's pay than federal law does.
When state law or the order itself differs
The CCPA is a floor, not a ceiling. Where state law protects more earnings, the more protective rule applies to ordinary garnishments (15 U.S.C. § 1677). States can also define the calculation differently, and child support orders may direct how deductions are treated. Always follow the order in front of you and the law of the applicable jurisdiction. Our legal updates track state changes as they happen.
Sources & further reading
Please note: Information and computational tools on this site are provided for operational benchmarking and compliance reference. They do not constitute formal legal advice. State laws may provide exemptions exceeding federal baseline formulas.