Definition: Payroll deductions are amounts subtracted from an employee's gross pay each pay period. They include legally required withholdings (such as income, Social Security, and Medicare taxes), court-ordered withholdings (such as garnishments), and voluntary deductions the employee authorizes (such as benefit premiums or retirement contributions).
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Every paycheck is a calculation: gross pay minus deductions equals net pay. Deductions are where tax rules, benefit elections, court orders, and wage laws meet. A mistake in any of them can mean an under-withheld tax liability, an over-garnished employee, or a deduction that is not allowed at all.
| Category | Examples | Who decides |
|---|---|---|
| Federal tax withholding | Federal income tax, Social Security, Medicare, Additional Medicare Tax | Federal law; income tax based on employee's Form W-4 |
| State and local taxes | State income tax, local income tax, certain state programs | State and local law |
| Court-ordered | Wage garnishments, child support orders, tax levies | Court or agency order |
| Voluntary | Health, dental, and vision premiums; retirement contributions; union dues | Employee election or agreement |
| Employer-requested | Uniforms, equipment, advances, overpayment recovery | Restricted by federal and state wage laws |
Each pay period, payroll starts with gross pay, applies any pre-tax deductions the employee elected, calculates taxes on the applicable wages, and then applies post-tax deductions and garnishments. The order matters, because some deductions reduce taxable wages and garnishment limits are based on disposable earnings.
An employee earns $900.00 gross for a weekly pay period. Using the IRS rates in Tax Topic 751:
Federal income tax withholding is calculated separately using the employee's Form W-4 and IRS withholding methods.
The Department of Labor's Fact Sheet #30 defines disposable earnings as "the amount of earnings left after legally required deductions are made." For ordinary garnishments, the weekly maximum is the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage ($7.25 x 30 = $217.50).
| Weekly disposable earnings | 25% of disposable | Amount over $217.50 | Maximum garnishment |
|---|---|---|---|
| $200.00 | $50.00 | $0.00 | $0.00 |
| $250.00 | $62.50 | $32.50 | $32.50 |
| $400.00 | $100.00 | $182.50 | $100.00 |
Fact Sheet #30 also explains that voluntary deductions, such as union dues or health insurance, generally cannot be subtracted when calculating disposable earnings, and that up to 50% or 60% of disposable earnings may be garnished for child support or alimony, with an additional 5% for support more than 12 weeks overdue. Where state law differs, the law resulting in the smaller garnishment applies.
Deductions are often described as pre-tax or post-tax. A pre-tax deduction is taken before certain taxes are calculated, which can lower the employee's taxable wages. A post-tax deduction is taken after taxes are calculated and does not change taxable wages. Whether a specific benefit is pre-tax, and which taxes it affects, depends on the type of plan and how it is set up, so confirm the treatment with your benefits provider or tax advisor rather than assuming.
For payroll teams, the practical point is order of operations. Pre-tax items come off first, then taxes are calculated on the remaining applicable wages, then post-tax items and garnishments are applied. Because garnishment limits are based on disposable earnings after legally required deductions, applying deductions in the wrong order can lead to over- or under-withholding.
Deductions are only as accurate as the gross pay they come from. EZTime captures hours with a GPS mobile time clock with geofencing, NFC tags, a tablet kiosk, or biometric clocks, flags issues with overtime and break alerts, and records every timecard correction in an audit trail. PTO and absence management keeps leave hours clean, and digital HR forms help you collect onboarding documents. Payroll-ready Excel and PDF exports go to any payroll software, which calculates taxes and deductions; EZTime does not run payroll. Plans start at $2 per employee per month with a 14-day trial. Visit the attendance clock page or see pricing.
This is general information, not legal or tax advice.
Mandatory deductions are required by law. They typically include federal income tax withholding, the employee’s share of Social Security and Medicare taxes, state and local income taxes where they apply, and court-ordered garnishments.
According to the IRS, the employee share is 6.2% for Social Security and 1.45% for Medicare. Employers also withhold an additional 0.9% Medicare tax on wages over $200,000 in a calendar year.
For ordinary garnishments, federal law limits the weekly amount to the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage. Different limits apply to child support, bankruptcy, and tax debts.
No. The IRS states that FUTA tax is paid only from the employer’s own funds and is not withheld from employees’ pay.