Disposable Earnings Definition

The portion of employee income that is available to spend as they choose, after payment of taxes or other legally mandated deductions from gross income.

Disposable Earnings Extended Definition
An employee’s disposable earnings are the income remaining after legally mandated deductions have been made.

Legally mandated deductions include:

• Social Security and Medicare taxes
• Federal income tax
• State income tax
• Local income tax
• State disability insurance

The deductions that do not qualify are 401(k) contributions and other employee-saving plans, life insurance, and medical insurance.

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Last Updated By

Rachel Blakely-Gray | Apr 13, 2023