Garnishment is a procedure creditors can use in most states to collect unpaid debt. This procedure involves having a court order direct your employer to deduct a portion of your earnings from your paycheck and send the funds to a court for payment of your debt. Whether garnishment amounts are tax-deductible depends on the type of debt the garnishment is intended to repay.
Deduction of Garnishment Amounts
Amounts garnished from your earnings may be tax-deductible if the debts they are intended to pay would ordinarily qualify for a tax deduction. This may include debts for qualified medical expenses, interest on a mortgage loan or property taxes. You may also deduct garnishment amounts for state taxes from your federal tax liability. However, you should consult with a qualified tax preparer or attorney before deducting any wage garnishment amounts to reduce your tax liability.
Non-Deductible Garnishment Amounts
Most debts subject to garnishment cannot be deducted to reduce your tax liability. For example, if a credit card company garnishes your wages for repayment of a credit card debt, you cannot deduct garnishment amounts. You also cannot deduct garnishments for federal taxes from your federal tax liability because this type of debt would not be deductible if you paid it directly to the Internal Revenue Service outside of a garnishment order. Likewise, garnishments for installment loans, lines of credit, alimony and child support are not tax-deductible.
Deducting Garnishment Amounts
If you plan to deduct amounts garnished from your wages from your tax liability, you will need to provide documentation that the garnishment is intended to pay a deductible debt. Make a copy of the summons and judgment order showing the nature of the debt and include this documentation with your tax return. You will also need documentation from your employer showing amounts garnished from each paycheck.
Considerations
A creditor cannot garnish your wages for most types of debts, except federal and state taxes and child support, without obtaining a legal judgment against you. Private creditors must file a civil lawsuit, typically in the municipal or magistrate court of the county where you live, and receive a judgment award from the court. In most states, the creditor must then apply for a writ of garnishment, which provides authorization for the creditor to order your employer to withhold part of your earnings for debt repayment.
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