These payments can be garnished for a defaulted student loan

Published

3 weeks ago

April 25, 2025

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What payments can be garnished?

The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers’ federal tax refunds, wages and Social Security retirement and disability benefits, according to higher education expert Mark Kantrowitz.

The federal government can intercept other funds such as state income tax refunds and lottery winnings, Kantrowitz said.

In some cases, federal student loan borrowers can also be sued by the U.S. Department of Justice, and face a levy on the funds in their bank accounts, he said.

Social Security recipients can typically see up to 15% of their monthly benefit reduced to pay back their defaulted student debt, but beneficiaries need to be left with at least $750 a month, experts said.

Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, said she was especially concerned about the consequences of resumed collections on retirees.

“Losing a portion of their Social Security benefits to repay student loans could mean not having enough for food, transportation to medical appointments, or other basic necessities,” Rodriguez said.

NY Fed: 9 million student loan borrowers face significant drops in credit score

Meanwhile, your entire federal tax refund can be seized, including any refundable credits, Kantrowitz said. Fortunately, if you’ve already received your 2024 federal income tax refund, “the government cannot claw it back,” Kantrowitz said.

As for your wages, the federal government can garnish up to 15% of your disposable pay without a court order, Kantrowitz said. Wages of federal workers may be easier to seize, he added.

How can I avoid collection activity?

Take steps to get out of default and to try to avoid the start of any garnishments, experts said.

Borrowers in default will receive an e-mail over the next two weeks making them aware of the new policy, the Education Department said. You can contact the government’s Default Resolution Group and pursue a number of different avenues to get current on your loans, including enrolling in an income-driven repayment plan or signing up for loan rehabilitation.

Some borrowers may also be eligible for deferments or a forbearance, which are different ways to pause your payments, Rodriguez said.

“We’re advising clients to request a retroactive forbearance to cover missed payments, and a temporary forbearance until they can get enrolled in an income-driven repayment plan,” she said.

If you do end up facing the garnishment of your Social Security benefits or wages, the government is required to provide you with notice before it starts its collection activity, Kantrowitz said. For your wages, a 30-day warning is required, while 65 days’ notice must be given before the seizure of Social Security benefits, he said.

You may have the option to have a hearing before an administrative law judge within 30 days of receiving a wage garnishment order, Kantrowitz said. Your wages may be protected if your employment has been spotty, or if you’ve filed for bankruptcy, he said.

“Borrowers can also challenge the wage garnishment if it will result in financial hardship,” Kantrowitz said.

You can dispute the offsets to your Social Security benefits, too, he said, by contacting the Education Department. The notice you receive should provide information on whom to contact.

Are you worried about the garnishment of payments such as wages or Social Security benefits? If you’re willing to share your experience for an upcoming story, please email me at [email protected].

Personal Finance

How to appeal your home’s property taxes

Published

9 minutes ago

May 16, 2025

Business Finance News

Milan2099 | E+ | Getty Images

Many homeowners have seen their property taxes increase in recent years because of rising housing prices and local tax rates. But the property tax assessment isn’t always set in stone: filing an appeal may lower the cost for years.

The median property tax bill in the U.S. in 2024 was $3,500, up 2.8% from $3,349 in 2023, according to an April report by Realtor.com.

How much you pay varies widely depending on where you live, and some places have seen higher bills and bigger increases.

As of 2023, the median property tax for homeowners in New York City was $9,937, according to a new report by LendingTree. The city ranks first among the metropolitan areas with the highest median property taxes. Rounding out the top three are San Jose, California and San Francisco, where homeowners paid a median $9,554 and $8,156, respectively.

Over 40% of homeowners across the U.S. could potentially save $100 or more per year by protesting their assessment value, Realtor.com estimates, with median savings of $539 a year.

“You’re banking on several years of savings,” said Pete Sepp, president of the National Taxpayers Union Foundation.

That’s because while some state or local governments mandate annual property tax reassessments, others set less frequent cycles with gaps of several years — and some have no set schedule at all. There are also some events that can trigger a reassessment, like a home sale or renovations.

Here’s what you need to know before you appeal a property tax increase, according to experts.

‘You’re paying more than you should’

A tax assessment is the way officials determine the value of your property for tax purposes.

Your home’s market value, or what it would sell for, is a major component, but other factors can sway that result. It will ultimately depend on how property taxes are assessed in your area.

“It’s not a nationwide formula,” said Melissa Cohn, regional vice president of William Raveis Mortgage.

However, it’s not uncommon for properties to be over-assessed, meaning you end up paying more in taxes than you should be, said Sepp. Sometimes it can be due to inaccuracies that were never corrected in your home’s assessment.

For example: Your assessment might have 2,500 square feet of livable space cited when it’s really 2,000 square feet, or note four full bathrooms when the home really has three full and one half-bath.

“Those kinds of things get embedded in your property assessment, and year after year, you’re paying more than you should,” Sepp said.

NTUF estimates 30% to 60% of taxable property in the U.S. is over-assessed, based on reports from individual state tax assessors.

How to appeal

Appealing your assessment is “not a terribly difficult investment of time for a residential property owner,” said Sepp. “The processes are reasonably easy and fair.”

Should you be successful, the change typically takes effect for the current tax year, and it becomes the basis for your next assessment, he said.

If you plan to appeal your taxes, your goal is to demonstrate how the assessor is incorrectly applying the assessment formula to your house, said Sal Cataldo, a real estate lawyer and partner at O’Doherty & Cataldo in Sayville, New York.

“It’s challenging the numbers that they’re plugging into the formula for your particular house,” he said.

Here’s how to get started:

1. See if your current assessment is accurate

The first step is to look at the accuracy of your own assessment. You should receive the assessment if it’s in the cycle. You should also be able to find or request your records online through your county, city or district assessor.

Make sure the details about your house are correct, said Sepp, such as the square footage or the age of your roof.

If you notice inaccuracies, start to gather paperwork as evidence. For example, if the roof appears to be relatively new in your assessment, but is in fact much older, look in your records for invoices from contractors from when it was previously repaired, or even the home inspection from when you bought the property.

2. Compare your property to your neighbors’ homes

Knowledge of other houses in your neighborhood or homes close to yours is important because it can help you appeal your tax bill, said Cataldo.

As tax records are public, you can find out what your neighbors with similar homes are paying in taxes. If you’re paying more, that might be an indication that your taxes may be over-assessed, he said.

You’ll also be able to see if they are paying less taxes because they qualify for tax exemptions, Cataldo said.

3. See if you qualify for tax exemptions

You might qualify for tax exemptions in your town, city, county or area, which can help reduce or even eliminate your property tax liability.

Some of the most common exemptions cover qualifying older residents, active military members, veterans, low-income households or disabled individuals, among others, Bankrate found.

4. Know your deadline

Make sure to meet your area’s recurring deadline to appeal your bill, Sepp said. Sometimes it will appear in fine print in the assessment. The time window to file your paperwork can span from 30 to 45 days ahead of that deadline, for example.

5. Seek expert guidance

Sometimes it might be worth tapping expert guidance or advice, such as a real estate agent who’s very knowledgeable about your area, or an appraiser. They can help you compare home values to yours. Before you hire someone, research to understand what their services entail and what they charge.

Personal Finance

Senior bonus vs. eliminating Social Security benefit tax

Published

1 hour ago

May 16, 2025

Business Finance News

The U.S. Capitol is seen on Capitol Hill in Washington, D.C., U.S., May 7, 2025.

Nathan Howard | Reuters

House Republicans’ “one, big, beautiful” tax bill includes a new temporary $4,000 deduction for older adults.

The change, called a “bonus” in the legislation, is aimed at helping retirees keep more money in their pockets and provides an alternative to the idea of eliminating taxes on Social Security benefits, which President Donald Trump and other lawmakers have touted.

The bill provides a “historic tax break” to seniors receiving Social Security, “fulfilling President Trump’s campaign promise to deliver much-needed tax relief to our seniors,” White House Assistant Press Secretary Elizabeth Huston said via email.

The proposal calls for an additional $4,000 deduction to be available to adults ages 65 and over, whether they take the standard deduction or itemize their returns. The temporary provision would apply to tax years 2025 through 2028. The deduction would start to phase out for single filers with more than $75,000 in modified adjusted gross income, and for married couples who file jointly with more than $150,000.

As a tax deduction, it would reduce the amount of seniors’ income that is subject to levies and therefore reduce the taxes they may owe. Notably, it is not as generous as a tax credit, which reduces income tax liability dollar for dollar.

A median income retiree who brings in up to about $50,000 annually may see their taxes cut by a little less than $500 per year with this change, noted Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

“It’s not nothing, but it’s also not life changing,” Gleckman said.

New deduction vs. eliminating taxes on benefits

The $4,000 senior “bonus” deduction would help lower-income people and would not help higher-income individuals who are above the phase outs, Gleckman said.

In contrast, the proposal to eliminate taxes on Social Security benefits would have been a “big windfall” for high-income taxpayers, he said.

“If you feel like you need to provide an extra benefit to retirees, this is clearly a better way to do it than the original Social Security proposal that Trump had,” Gleckman said.

Social Security benefits are taxed based on a unique tax rate applied to combined income — or the sum of adjusted gross income, nontaxable interest and half of Social Security benefits.

Beneficiaries may have up to 85% of their benefits subject to taxes if they have more than $34,000 in combined income individually, or more than $44,000 if they are married and file jointly.

Up to 50% of their benefits may be taxed if their combined income is between $25,000 and $34,000 for individual taxpayers, or between $32,000 and $44,000 for married couples.

Fiscal hawks say House tax bill can't pass in current form

Beneficiaries with combined income below those thresholds may pay no tax on benefits. Therefore, a policy to eliminate taxes on benefits would not help them financially.

The proposed $4,000 tax deduction for seniors may help some retirees who are on the hook to pay taxes on their Social Security benefit income offset those levies, according to Garrett Watson, director of policy analysis at the Tax Foundation.

However, the impact of that change would vary by individual situation, he said. For some individuals who pay up to an 85% tax rate on their benefit income, “that $4,000 deduction can make a difference,” Watson said.

‘Bonus’ would be less costly to implement

The Senate is prohibited from including changes to Social Security, including the proposal to eliminate taxes on benefits, in reconciliation bills like the tax package now up for consideration.

Notably, the proposed $4,000 deduction for seniors would be less expensive.

If that change were made permanent, it would cost around $200 billion over 10 years, Watson said. In contrast, eliminating taxes on Social Security benefits would cost more than $1 trillion over a decade, he said.

“It’s actually probably less than 20% of the size of the tax cut that was initially pitched during the campaign,” Watson said.

Moreover, the cost for the $4,000 deduction would come out of general revenue for income tax, which means it would not directly take money from Social Security’s trust funds, which already face a funding shortfall.

Personal Finance

Who benefits from bigger child tax credit proposed by House GOP

Published

14 hours ago

May 15, 2025

Business Finance News

Jacob Wackerhausen | Istock | Getty Images

House Republicans’ child tax credit plan

The Tax Cuts and Jobs Act, or TCJA, of 2017, temporarily boosted the maximum child tax credit to $2,000 from $1,000, an increase that will expire after 2025 without action from Congress.

If enacted, the House bill would make the $2,000 credit permanent and raise the cap to $2,500 from 2025 through 2028. After 2028, the credit’s highest value would revert to $2,000, and be indexed for inflation.

However, the plan does “nothing for the 17 million children that are left out of the current $2,000 credit,” said Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division.

Typically, very low-income families with kids don’t owe federal taxes, which means they can’t claim the full child tax credit.

Plus, under the House proposal, both parents must have a Social Security number if filing jointly and claiming the tax break for an eligible child.

“This bill is taking the child tax credit away from 4.5 million children who are U.S. citizens or lawfully present,” Cox said.

How the 2025 child tax credit works

For 2025, the child tax credit is worth up to $2,000 per qualifying child under age 17 with a valid Social Security number. Up to $1,700 is “refundable” for 2025, which delivers a maximum of $1,700 once the credit exceeds taxes owed.

After your first $2,500 of earnings, the child tax credit value is 15% of adjusted gross income, or AGI, until the tax break reaches that peak of $2,000 per child. The tax break starts to phase out once AGI exceeds $400,000 for married couples filing together or $200,000 for all other taxpayers.

“Almost everyone gets it,” but middle-income families currently see the biggest benefit, said Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center.

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A bipartisan House bill passed in February 2024 aimed to expand access to the child tax credit and retroactively boosted the refundable portion for 2023, which would have impacted families during the 2024 filing season.

The bill failed in the Senate in August, but Republicans expressed interest in revisiting the issue.

At the time of the vote, Sen. Mike Crapo, R-Idaho, described it as a “blatant attempt to score political points.” Crapo, who is now chairman of the Senate Finance Committee, said in August that Senate Republicans have concerns about the policy, but are willing to negotiate a “child tax credit solution that a majority of Republicans can support.”

Although House Republicans previously supported the expansion for lower-earners, the current plan “shifts directions and focuses the benefits on middle and high-income families,” Maag said.