Types of statutory deduction

Statutory deductions are any types of deductions that are required by law or regulation. The most common examples of statutory deductions are payroll taxes and court orders, such as child support or a payment of a debt. Some statutory deductions, such as payroll taxes, are deductions that an employer has to withhold from his employees. However, employers cannot deduct court orders from employee pay without a written permission from the court.

Income Tax

The first type of statutory deduction is income tax. Income tax is a part of the payroll taxes, which are taxes that the state and federal government requires employers to withhold from their employees. In the case of income tax, employers are required by law to withhold a percentage of an employee's wage and pay this amount to federal and state governments. This percentage varies according to an employee's level of income and his filing status. Employers use form W4 to figure out how much they need to withhold.

Social Security Tax

Another type of statutory deduction is the Social Security tax, which corresponds to 6.2 per cent of an employee's wage. It is considered a statutory deduction because employers are required by law to withhold this percentage from their employees in every paycheck. This tax is used to pay for an employee's retirement compensation and any disability benefits he might receive in the future. Employers are also required to contribute an additional 6.2 per cent of their employee's wage.

Medicare Tax

Another element of payroll taxes is Medicare tax. This tax is used to build funds for Medicare (health insurance) when an employee reaches retirement age. It is a statutory deduction because employers are required by law to withhold 1.45 per cent of their employees' wages and pay them to the federal government. Employers are also required to pay an additional 1.45 per cent of their employees' wages in Medicare tax.

Child Support

Child support is an amount of money that the court requires a divorced parent to pay every month in order to help with his children's living expenses. When the court orders an employer to withhold this amount from his employee's wage (which is known as wage assignment), the child support becomes a statutory deduction. Once the court has given the order for payment, the employer withholds the specific amount from the parent's paycheck and sends the money directly to the other parent.


When you do not pay your creditors, they can take you to court and try to collect what you owe them. If the court decides that you have to pay what you owe but realises you do not have the money available, it allows your creditor to take money from your property or wages. If the creditor takes money from your wages, the garnishment is considered a statutory deduction. The court gives your employer the garnishment papers that order him to take out a certain amount from each paycheck to pay your debt.

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About the Author

Ronald Kimmons has been a professional writer and translator since 2006, with writings appearing in publications such as "Chinese Literature Today." He studied at Brigham Young University as an undergraduate, getting a Bachelor of Arts in English and a Bachelor of Arts in Chinese.

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