How Child Support Orders Are Calculated

How Child Support Withholding Orders Are Calculated

The previous article entitled The Basis of Child Support Withholding Orders outlined the legal basis for child support orders, provided the definition of disposable earnings, and listed the limits on child support deductions.

According to the CCPA, disposable earnings are determined by subtracting all deductions required by law from an employee’s gross earnings. Deductions required by law include withholding for federal, state, or local income tax, social security or Medicare tax, state unemployment or disability tax, and mandated payments for state employee retirement systems.

Child support deductions are limited to a percentage of the employee’s disposable earnings. Under the CCPA the percentages change depending on whether the employee is supporting another family or is 12 weeks or more in arrears in making payments. The percentages are as follows:

50% - Supports a second family and is less than 12 weeks in arrears
55% - Supports a second family and is 12 or more weeks in arrears
60% - Does not support a second family and is less than 12 weeks in arrears
65% - Does not support a second family and is 12 or more weeks in arrears

As mentioned in the previous article, a state may include other deductions in calculating disposal earnings, or it may reduce the limits on a child support order, so the three examples below have been chosen to illustrate this as well.

Example of a Child Support Order in Pennsylvania

Pennsylvania follows the CCPA limits as outlined above. In this example, a married employee earns a wage of $490 for a two-week period. In addition to the taxes to be withheld, $42 is deducted from each paycheck for health insurance premiums. His employer receives a child support order with instructions to withhold $224 every two weeks.

The employee’s disposable earnings are calculated as follows:

Federal Withholding Tax = $0.00
Social Security Tax = $27.78
Medicare Tax = $6.50
Pennsylvania Income Tax = $13.75
Local Earned Income Tax = $4.48
PA SUI = $0.39
Total Taxes Withheld = $52.90
Disposable Earnings = $490.00 - $52.90 = $437.10

Please note that the health insurance deduction is not included in the calculation of disposable earnings.

Since the employee is supporting a second family and is not behind in payments, the child support deduction is limited to 50% of his disposable earnings, which is equal to $218.55. This amount is less than the $224.00 in the support order, so only $218.55 can be deducted from the employee’s paycheck.

The employee’s net pay would be calculated as follows:

Gross Wages = $490.00
Total Taxes Withheld = $52.90
Child Support Order = $218.55
Health Insurance = $42.00
Net Pay = $176.55

Example of a Child Support Order in North Carolina

The limits for child support withholding in North Carolina are more restrictive than the CCPA. The maximum withholding is based on the following guidelines:

40% when there is one child support order
45% when there is more than one child support order and the employee is supporting a current spouse or other dependent children
50% when there is more than one child support order and the employee is not supporting a second family

In North Carolina there is no increase in the percentage limit if the employee is arrears in making payments.

In this example the employee earns the same gross wage as the employee in Pennsylvania and pays the same amount for health insurance for him and his current wife. The child support order is also for $224 every two weeks.

The employee’s disposable earnings are calculated as follows:

Federal Withholding Tax = $0.00
Social Security Tax = $27.78
Medicare Tax = $6.50
North Carolina Income Tax = $8.00
Total Taxes Withheld = $42.28
Disposable Earnings = $490.00 - $42.28 = $447.72

Since there is only one child support order, the deduction is limited to 40% of the employee’s disposable earnings, or $179.08. Again, this amount is less than the amount on the child support order. So the employee’s net pay would be calculated as follows:

Gross Wages = $490.00
Total Taxes Withheld = $42.28
Child Support Order = $179.08
Health Insurance = $42.00
Net Pay = $226.64

Example of a Child Support Order in Florida

Like Pennsylvania, Florida also follows the CCPA, but there is no state income tax in Florida. If the circumstances are the same, the calculation of disposable earnings would be as follows:

Federal Withholding Tax = $0.00
Social Security Tax = $27.78
Medicare Tax = $6.50
Total Taxes Withheld = $34.28
Disposable Earnings = $490.00 - $34.28 = $455.72

50% of the employee’s disposable earnings would be $227.86, which is more than the amount on the child support order, so only the amount on the order would be deducted from the employee’s earnings. The employee’s net pay would be calculated as follows:

Gross Wages = $490.00
Total Taxes Withheld = $34.28
Child Support Order = $224.00
Health Insurance = $42.00
Net Pay = $189.72

The Impact of Child Support Payments

As shown above, the impact of a child support order will vary according to the state in which the order is issued or applied. This introduces an additional factor that each employer must consider. Federal law requires an employer to honor an out-of-state child support order, but each state regulates whether its limits applies to the order, or the limits of the state issuing the order apply. Such issues are beyond this article, but they are addressed in the publication Complete Guide to Federal and State Garnishment, by Amorette Nelson Bryant (Aspen Publishers, Inc.).

A child support order is an involuntary deduction from an employee’s paycheck, but hopefully the above information will be useful in explaining the process and impact on payroll.