California has statewide guidelines and Family Code sections that define gross income. California Family Code section 4058 considers gross income that from any source except for child support payments that are actually received or public assistance programs where the eligibility for program assistance is based on need. Some California appellate courts have determined that supplemental Social Security (SSI) benefits are also excluded from income because they are based on public assistance. In addition, some appellate courts have ruled spousal support payments between the same parents must also be excluded.
This article is not legal advice. You should not rely on it regarding your specific situation. Please seek the advice of an experienced family law attorney if you have questions about your situation.
So what is considered income for child support in California?
By statute, income includes salaries and wages as well as commissions, bonuses, rents (which are typically from rental property), dividends, pensions, interest income, income from a trust or annuity (unless the annuity is connected to a non-income source such as personal injury proceeds), benefits paid as a result of a workers compensation case, unemployment insurance, disability insurance benefits (especially when it is designed to replace income), Social Security benefits and alimony that is received from an unrelated case to the parent that seeks child support. Like many general rules, there may be exceptions so the advice of an attorney you retain as to whether or not an item is or is not income will be necessary.
For Orange County business owners or executives going through a divorce, their income is typically the gross revenues of the business minus business expenses.
Courts also have the discretion to include as income those benefits (whether those are employment or self-employment) that reduce living expenses. This reduction of the expenses can include rent-free housing, meal allowances and just about anything that reduces the living expenses of an individual and for which individual would normally have to pay but receives as a benefit of employment.
More recent case law (a case called In re Marriage of Alter) has also stated that recurring monetary gifts from a person’s parents can also be considered income regardless of whether or not the gifts are considered income for federal tax purposes.
For those who hold stock options, there are cases that have determined unexercised stock options can be considered income.
For service members, the basic allowance for housing and subsistence have been considered income.
In Orange County, like other family courts, the process of determining income starts with the filing of a divorce or paternity petition. Child support is probably the most often litigated issue in a divorce or paternity case. Child support is so often disputed that Orange County has its own Department of Child Support Services, which is a government agency designed to establish and enforce child support orders for men and women who cannot afford an attorney or do not wish to retain one. While the Department’s efficiency compared to that of an experienced private attorney is reasonably questionable, the Department does serve a function for those unable to pay for private counsel. This Department of Child Support Services also collects child support for people who are on government aid but reimburses the county or state for that aid.
Unless child support is not disputed or the parents’ incomes are easy to figure out because they are both W2 employees, it is common for there to be some investigation or discovery (formal written requests for information during the divorce or paternity case) during the litigation process.
A question that often comes up is what isn’t income for California child support purposes?
This list is not intended to be exhaustive but does highlight some of the more common types of money received that the Orange County family court will not input into the California guideline formula when determining child support.
Student loans that are used for books and tuition are not considered income for child support purposes.
The principle of life insurance death benefits are not considered income. However any interest that is obtained from it or income received from it can be considered child support.
Future income that is speculative is not considered income for child support purposes. For there to be a consideration of future income, there generally has to be some evidence that the future income is consistent with past income.
Stock is not considered income when it cannot be liquidated or is received in connection with the sale of the business. This is not a hard and fast rule and there are exceptions as the type of stock, its marketability and the potential rate of return from it can be considered by the court.
Under most circumstances, equity in a parent’s residence is not considered income. The two cases that have come down in California Courts on this issue as of the date of this article are Marriage of Henry in 2005 and Marriage of Williams in 2007. A careful reading of these decisions is needed to understand this rule and the potential, limited exceptions to it.
Personal injury proceeds are generally not considered income unless the personal injury proceeds were specifically earmarked as compensation for lost income. It is not common for that to happen in a personal injury case although it is possible. Typically, the settlement agreement does not distinguish between income versus non-income or what specifically the personal injury damages were designed to compensate. Such damages are traditionally awarded in a settlement as a lump sum without designation. Once again, the advice of a family law attorney about your specific situation is necessary. There may be exceptions and situations where personal injury proceeds may be considered income and the attorney you hire should evaluate your situation based on its facts.
Gifts of a nonmonetary nature are generally not considered income. It is not unusual for a parent to provide an adult child with a gift whether that is small items such as household items or something as large as a car. In such situation the value of that gift is generally not considered income for child support purposes.
The determination of child support and what is and is not income in a California child support case can be complicated and in any case where one or both parents are some employed and have a non-W-2 income structure, the services of an experienced Orange County lawyer who is knowledgeable on child support issues can be very helpful.
If you have a child support matter, whether you are the one facing a child support award against you or seeking child support, you owe it to yourself to get a consultation from our experienced family law lawyers. We will help direct you toward the right path and will use our experience and knowledge to assist you in ensuring that you receive a fair child support award or, if you are the paying parent, that you are not ordered to pay child support inconsistent with your income and ability to pay.