SECTION FIVE. Parents’ Adjusted Gross Income
When we determine the parents’ adjusted gross income, we include income from any source, including spousal maintenance. As a quick note, the meaning of “Gross Income” and “Adjusted Gross Income” for child support purposes differs from that used for income tax purposes. When a parent has fluctuating or seasonal changes to income, then the amount is annualized to give a consistent monthly figure. Here is a list of income sources to include in gross income:
“[I]ncome from salaries, wages, commissions, bonuses, dividends, severance pay, pensions, interest, trust income, annuities, capital gains, [parent’s] social security benefits…, worker’s compensation benefits, unemployment insurance benefits, disability insurance benefits, recurring gifts, prizes, and spousal maintenance…”
Child support received for another child under a separate order is not included as a parent’s income for the purposes of calculating support for this order. And if a parent remarries, the income of his or her new spouse is not considered income for that newly married parent. The new spouse has no legal duty to support a step-child. When income is not recurring in nature or is not continuing, then including it for child support purposes is discretionary with the court. Unless a parent’s work schedule routinely involves overtime, or the parent consistently takes seasonal employment, for example, then the parent should have the choice to work overtime or take a second job without increasing his or her child support obligation. Means-based public assistance benefits are not included in the parents’ gross income. So benefits or money received under the following programs would not be included: Food Stamps and General Assistance, Supplemental Security Income (SSI), and Temporary Assistance to Needy Families (TANF). When the parent is self-employed or owns a business, then gross income for child support purposes includes “gross receipts minus ordinary and necessary expenses required to produce income.” Once again, the expenses that the IRS accepts are not necessarily what the court will accept for child support purposes. If the expense eases the parent’s living costs, then it may be added back in as income by the family court. For example, the company car is a necessary and legitimate business expense, but it also allows the parent to avoid buying a personal vehicle. So a personal value, enjoyed by use of the company car, may be added back into that parent’s gross income. The same is true with any reimbursements or other benefits received as a business operator, so long as the result is a reduction in that parent’s living expenses. When a parent is unemployed or underemployed, the court may also attribute income to him or her. When there is no reasonable cause for the unemployment or underemployment, then the court may attribute income based on what that parent’s earning capacity is or should be. Any parent required to pay child support will most likely be attributed at least minimum wage. The court has discretion to attribute income, and may choose not to attribute when circumstances such as the following exist:
1. A parent is physically or mentally disabled,
2. A parent is engaged in reasonable career or occupational training to establish basic skills or reasonably calculated to enhance earning capacity,
3. Unusual emotional or physical needs of a natural or adopted child require that parent’s presence in the home, or
4. The parent is a current recipient of Temporary Assistance to Needy Families.”
We don’t generally include a parent’s community property disposition as gross income, even if it actually does generate income. There are exceptions, however, such as when that parent defrauded the other party by hiding community assets, or fraudulently disposed of community or jointly held property.
SECTION SIX. Adjusted Gross Income
Once the gross income is established, guideline-approved adjustments reduce the amount. Those adjustments, which are deducted from the parent’s gross income, include the following:
- The parent actually paying court-ordered spousal maintenance (for any ex-spouse) shall deduct that amount from his or her gross income. If the spousal support is in arrears, however, then it is not deducted as it was not paid. (The parent receiving spousal support will add that to his or her gross income.)
- The parent ordered to pay, and who actually pays, child support for a child from another relationship shall deduct that amount from his or her gross income. And, again, if that child support is in arrears, it cannot be deducted because it wasn’t paid.
- The parent who actually pays child support for a natural or adopted child from another relationship, but who is under no court order to do so, shall deduct a simplified amount limited by the guidelines.
- The custodial parent of a child from another relationship will deduct a simplified amount limited by the guidelines.
SECTION SEVEN. Combined Adjusted Gross Income
Once the adjusted gross incomes are established for both parents, the amounts are added together to give us the Combined Adjusted Gross Income.