Income Available for Payment of Alimony
What is considered income for alimony purposes?
Understanding income for alimony purposes just got easier
Income available for spousal support is similar to income available for child support in its analysis but it is not always the same. And unlike child support, the court has more discretion as to what it may consider as "income" for support purposes.
There are certain obvious forms of income such as wages and salary
For a W-2 employee, the paycheck tells the story. For corporate executives who are employed for the company, there may be perquisites that factor into the compensation.
For self employed men and women, income calculation is more complicated. This is especially true depending on the form of entity. For example, income may be different for a Subchapter S corporation, limited liability company (LLC) or partnership, as opposed to a subchapter C corporation.
On this page, we will discuss the various types of income available for spousal support purposes. Ready? Let's start.
What is income?
Income includes wages and salaries, commissions and bonuses, rents, dividends, pensions and retirement income, trust income, interest earned on income, income from annuity, disability insurance benefits, unemployment benefits, Social Security benefits, and under some circumstances potentially Worker's Compensation benefits.
For a self-employed person, income available for support purposes (also sometimes called “cash flow”) is typically the gross revenue from the business minus reasonable business expenses. It is common to add back certain business expense write-offs as income to a self-employed spouse if that business expense pays for a personal expense, in part, and especially in whole.
Another disputed issue is depreciation and its role in calculating income for the self-employed spouse. This issue can get complex but depreciation is typically not an out-of-pocket expense and therefore may be disregarded under some circumstances when determining income available for support.
How is income determined?
For the wage earner, determining income available for support is usually easy. A W-2 will often tell us what a person's total income is for the year. Pay stubs reveal income on a monthly basis and the year-to-date tells us income for that fiscal or calendar year.
For the self-employed person, it gets more complicated. An attorney will need to review or hire a forensic accountant to review the company's books including its general ledgers, profit and loss statements and balance sheet. These are the starting point for determining income available for support from a self-employed person.
Spousal support is not always based on actual income
The court also has the power to impute income if it finds a person is either unemployed or underemployed but has the ability, capacity and opportunity to be employed. In a divorce case, whether prejudgment or post-judgment, a spouse who seeks to impute income to the other spouse will generally retain a vocational examiner pursuant to Family Code 4331.
Ready to learn more? Click on the links below for related reading on alimony in California.