Tax Debt ReliefWage Garnishment

Wage Garnishment Limits Differ Depending on Debt

By April 8, 2018 No Comments

Wage garnishment can be devastating, especially if you are already experiencing financial difficulties or rely on most of your income to pay living expenses. Of course, just how significantly wage garnishment impacts your financial stability will depend on the amount of the garnishment.

Understanding exactly how much of your income can be garnished may be difficult. Federal law sets one limit, but some states provide greater protection from garnishment. Some garnishment provisions speak in terms of a percentage of gross income, and others a percentage of disposable income. And, different types of debt may be garnished differently.

Garnishment Limits by Type of Debt

Wage Garnishments to Pay Private Judgments

If you’re familiar with wage garnishment limits at all, this general limitation is probably the one you know. When a judgment is entered against you for a private debt such as a loan default, unpaid credit card debt, automobile repossession, or eviction, federal law limits wage garnishment to 25% of disposable income. The limit may be even lower if taking 25% would leave you less than 30 times the minimum wage.

So, under federal law, a person earning $400 per week in disposable income and subject to a civil judgment could be subject to garnishment of up to $100 per week, leaving him $300 per week.

Many states protect more of your income, often limiting garnishment to 10% or 15% of your income. However, these limits don’t apply to all types of debt.

Wage Garnishment for Child Support

While federal law does limit wage garnishment to pay child support obligations, the limitation protects very little of the wage earner’s income. If the parent being garnished has other dependents, the garnishment is capped at 50% of disposable income. However, if the parent does not have other dependents, the limit is bumped up to 60%. An extra 5% may be added if the payor is more than 12 weeks in arrears.

So, a person earning $400 per week in disposable income and subject to child support garnishment could lose $200, $240, or $260 each week, depending on whether he had other dependents and how far behind his payments were. For a person 12+ weeks in arrears with no other dependents, child support garnishment could reduce $400 per week in disposable income to just $140 per week.

Wage Garnishment for Tax Debt

Garnishment by the IRS and state taxing entities for unpaid tax debt can seriously impact income. The limit on IRS garnishment is calculated based on your tax filing status and number of exemptions. There is no percentage-based cap on IRS garnishment. In 2018, a single person claiming one exemption is entitled to keep $204.81 per week. That’s true regardless of income. So, if the debtor earns $250 per week, the IRS will take $45.19 each week. But, if the debtor earns $2,000 a week, the IRS will take $1,795.19 each week, still leaving the debtor with just $204.81 per week.

Obviously, this type of garnishment can make it impossible for a person to remain self-supporting. While state tax garnishment limits vary, they generally allow for the garnishment of a much larger percentage of income than the general state and federal garnishment caps.

Act Quickly if You Receive a Notice of Garnishment

If you’ve received a notice that your wages will be garnished for a tax debt, or if you have been unable to reach a payment agreement and anticipate further collection action, contact us to get help right away. Wage garnishments for tax debt can destroy your financial stability, and you have more and better options before garnishment begins.