If you’re having your wages garnished, you may want to deduct it on your taxes. Whether you can depends on the exact situation.
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This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.
What is a wage garnishment?
A wage garnishment is when money is deducted from your paycheck to cover a debt. The debt might be for federal taxes, state taxes, child support, alimony, credit cards, loans, court cases, or other debts.
A wage garnishment is a legal tool. It’s not a special tax rule.
A wage garnishment is just another way of paying money that you owe.
Is a wage garnishment deductible?
Whether a wage garnishment is deductible depends on what it’s for. A wage garnishment isn’t automatically deductible or not deductible.
If the reason for the wage garnishment is deductible, you can generally deduct the garnishment the same as if you wrote a check for that expense.
If the reason for the wage garnishment is not deductible, you generally can’t deduct the garnishment.
Examples of Deductible and Non-Deductible Wage Garnishments
- Federal taxes: Generally not deductible
- State taxes: May be eligible for the State and Local Tax (SALT) deduction. If eligible, generally deductible in the year you made the payment (had the garnishment). Interest and penalties are generally not deductible, so you have to calculate the portion that goes to the original tax balance.
- Child support: Generally not deductible.
- Alimony agreements executed by December 31, 2018: Payments towards an alimony agreement that began during or prior to December 2018 are generally deductible.
- Alimony agreements executed or changed after January 1, 2019: Since 2019, and for certain changes to older agreements, alimony payments are generally not deductible.
- Credit cards and loans: Generally not deductible.
- Student loans: Student loan interest, but not principal, is generally deductible up to $2,500 per year. You’ll need to calculate the portion of the garnishment that went towards interest.
- Court cases: Generally not deductible for personal issues. Lawsuits regarding business activities may be deductible depending on the reason for the lawsuit.
Should employers withhold taxes on wage garnishments?
Yes, a wage garnishment is taxable income. For tax purposes, a $100 wage garnishment is the same as you getting paid then writing a $100 check.
Your employer should generally calculate your tax withholding before subtracting the wage garnishment.
If the wage garnishment is for something that’s deductible, you can claim the deduction on your tax return. You may also wish to ask your employer to adjust your tax withholding.
How to Claim a Wage Garnishment on Your Taxes
There is no tax form for a wage garnishment. Instead, you claim the deduction using the form for that deduction.
For example, if you’re claiming state taxes, they go on Schedule A Itemized Deductions.
Keep records of your garnishments just like you would keep receipts of other payments. This might include your pay stubs, the garnishment order, and/or statements from who you had the debt with.