Final answer:
Disposable earnings are calculated by subtracting all mandatory deductions required by law, such as taxes, social security, and Medicare, from an employee's gross income.
Step-by-step explanation:
The correct option for what is subtracted from earnings to calculate disposable earnings is B. All deductions required by law. Disposable earnings are an employee's income after mandatory deductions such as taxes and social security contributions have been subtracted.
These mandatory deductions include Social Security, which is 6.2% of gross income, Medicare at 1.45%, and federal and state taxes which can be assumed at 15% for the calculation purposes. Union dues and life insurance premiums, an example of voluntary deductions or non-mandatory deductions, are not subtracted to calculate disposable income.