What are garnishment limits?
Garnishment limits refer to the maximum amount of an employee’s wages that can legally be withheld to satisfy a debt. These limits are in place to protect employees from losing too much of their income to creditors, while still allowing lenders, courts, and government agencies to collect what’s owed. As an employer, understanding garnishment limits is crucial to staying compliant and ensuring you're withholding the correct amount from an employee’s paycheck.
Wage garnishments are typically ordered by a court or government agency for unpaid debts like child support, back taxes, student loans, or credit card judgments. Once the order is in place, you're legally required to withhold a portion of the employee’s wages, and you must do it within the legal limits set by federal and state laws.
Federal garnishment limits under the CCPA
The Consumer Credit Protection Act (CCPA) sets the federal standard for wage garnishment. For most debts (like consumer loans or credit card judgments), the limit is the lesser of the following:
- 25% of the employee’s disposable income
- The amount by which disposable income exceeds 30 times the federal minimum wage ($7.25/hour as of 2025)
- Whichever is less
Disposable income refers to the amount left after legally required deductions, such as federal and state taxes, Social Security, and Medicare.
Example:
If an employee earns $500 per week after taxes:
- 25% of $500 = $125
- 30 × $7.25 = $217.50 → $500 - $217.50 = $282.50
- Garnishment limit is the lesser of the two = $125
This ensures employees still have a baseline income after garnishments are applied.
Special garnishment limits for certain debts
Some types of debts follow different garnishment rules:
- Child support or alimony: Up to 50–65% of disposable income, depending on whether the employee supports another family
- Federal student loans: Up to 15% of disposable income
- Federal or state taxes: Limits are based on IRS or state-specific exemption tables
These orders take priority over general consumer debt garnishments. If an employee has multiple garnishments, the highest-priority debts (like child support) are fulfilled first.
State garnishment limits
Many states have their own wage garnishment laws, and some offer stricter protections than the federal standard. For example:
- Texas, Pennsylvania, and North Carolina generally prohibit wage garnishment for most debts
- Massachusetts and New York offer lower maximum garnishment percentages for lower-income workers
If federal and state laws differ, employers must follow the rule that offers more protection to the employee.
What happens if you exceed garnishment limits?
Exceeding the legal garnishment limit—even accidentally—can result in serious consequences:
- You may be required to repay the over-withheld wages to the employee
- You could face fines, penalties, or even lawsuits
- Your business could be held liable for violating the CCPA or state wage laws
This is why it’s important to calculate garnishments correctly, keep accurate payroll records, and stay up to date on the applicable rules.
How to apply garnishment limits correctly
- Review the garnishment order carefully – Confirm the type of debt and any priority rules
- Calculate disposable income – Start with gross pay, subtract mandatory deductions
- Apply the correct garnishment cap – Use the lower of the two federal formulas or state-specific limits
- Check for multiple garnishments – Prioritize and allocate according to the law
- Track and document everything – Keep garnishment history for each employee
Garnishments often span months or years, so accuracy and consistency are key.
How Homebase payroll helps with garnishment compliance
Wage garnishments can be legally complex and time-consuming. Homebase payroll takes the pressure off by automating calculations, applying legal limits, and keeping you compliant at every step.
With Homebase payroll, you can:
- Automatically apply federal and state garnishment limits
- Manage multiple garnishments per employee
- Withhold and remit garnished wages to the correct agency or creditor
- Track payment history and deadlines
- Avoid over-withholding and potential legal issues
Explore Homebase payroll to simplify garnishment processing, protect your employees, and keep your business compliant with confidence.