Learn About Income Available for Child Support in California

How Is Income Available for Child Support Calculated?

In California, income available for child support (net disposable income) is calculated using specific guideline factors. This process allows for fair support for children while considering each parent's financial situation. We cannot explain every aspect of this process because this article would turn into a small book. So, there is more to the subject than what we write below. However, this article will give you a nice overview of determining income available for child support and answer most general questions. Let's explore how this works.

1. Federal and State Income Taxes

Income taxes impact net disposable income for child support calculations. No one keeps their entire gross paycheck because taxes come first. Here's what you need to know:

• Tax filing status must match actual practices. Whether you file as single, married filing jointly, or head of household affects your tax liability and available income.
• The number of dependents claimed affects the calculation. More dependents usually mean lower taxes and potentially more income for support.
• If a parent isn't paying taxes, it might be argued that no tax deduction should apply when calculating support. This often comes up with self-employed parents or those with unreported income.
• Tax deductions and credits can affect overall tax liability and net disposable income. Mortgage interest, charitable donations, and child tax credits all play a role.

2. Health Insurance Premiums

Health insurance costs are a key factor in support calculations. Deductible costs include:

• Premiums for the parent paying support. This recognizes the need for the parent to maintain their own health to continue earning and supporting the child.
• Premiums for supported children. This encourages parents to maintain health coverage for their kids.
• Both group (employer-provided) and private insurance plans count.
• State disability insurance premiums are also deductible.
• Vision and dental insurance premiums, if separate from general health insurance, may also be considered.

Remember, only the cost of insurance premiums is deductible, not out-of-pocket medical expenses or co-pays.

3. Mandatory Retirement and Union Dues

While voluntary retirement contributions generally don't count in support calculations, mandatory deductions make a difference:

• Many government employees, like teachers or firefighters, have required pension contributions. These mandatory amounts are deductible.
• Some private sector jobs also have mandatory retirement contributions, which would be considered.
• Regular, mandatory union dues from a parent's paycheck are factored into net disposable income calculations.

4. Existing Child Support or Alimony Payments

Pre-existing financial obligations for child support or alimony affect calculations for current support. Here's how it generally works:

• Court-ordered child support for children from other relationships is typically deducted from gross income when figuring support for the current case.
• Similarly, court-ordered alimony (spousal support) payments to former spouses are usually deductible.
• Support for children without a court order is harder to deduct. Courts generally want to see official documentation.
• The amount deducted shouldn't exceed what California requires under child support guidelines. This prevents inflating payments to one child at another's expense.
• Only payments for natural or adopted children usually qualify. Stepchildren typically don't count unless there's a legal obligation to support them.
• If a parent is paying past-due support (arrears) in addition to current support, the court may factor this into calculations.

Parents claiming these deductions must provide clear proof of payments, usually through bank statements or canceled checks. Court orders for existing support obligations are also typically required.

5. Job-Related Expenses

Job-related expenses can sometimes be considered when calculating net disposable income. However, these deductions face scrutiny:

• They must be reasonable and necessary, directly related to maintaining employment.
• There should be a clear link between the expense and the parent's ability to earn income or do their job.
• The court must decide that allowing the deduction is fair and in the child's best interest.
• Only expenses not reimbursed by the employer can be considered.

Examples of potentially deductible job-related expenses include:

• Mandatory uniforms that can't be worn as everyday clothing
• Specialized tools or equipment necessary for the job and not provided by the employer
• Fees for required professional licenses or certifications
• Mandatory, unreimbursed travel expenses (not including regular commuting costs)

6. Hardship Deductions

Hardship deductions in California child support calculations are for exceptional circumstances that significantly impact a parent's ability to pay support. These aren't automatically granted and require substantial evidence. Types of hardship deductions include:

Extraordinary Health Expenses

• This means medical costs are far beyond routine healthcare.
• Examples include ongoing treatment for chronic illnesses, necessary surgeries not covered by insurance, or costs related to severe disabilities.
• Courts look at the necessity of the treatment and its impact on the parent's finances.

Uninsured Catastrophic Losses

• This covers major financial losses from unforeseen events not covered by insurance.
• Examples might be significant property damage from natural disasters, large-scale theft losses, or major accidents.
• Courts look at the extent of the loss and how it affects the parent's ability to pay support.

Minimum Basic Living Expenses for Other Children

• In rare cases, courts may consider basic living costs for other children the parent must legally support.
• This usually applies to natural or adopted children from other relationships.

Frequently Asked Questions About Income for Child Support

What is considered income for child support in California?

California law takes a broad view of income for child support purposes. The goal is to capture all reasonable sources of revenue available to a parent to ensure adequate child support. Here's a breakdown of what's typically considered income. This is not an example of every type of income a court may consider:

Employment Income

• Regular wages and salaries
• Bonuses and commissions
• Overtime pay
• Stocks and options

Self-Employment and Business Income

• Net profits from business operations
• Distributions from partnerships, limited liability companies or corporations

Investment Income

• Dividends from stocks or mutual funds
• Interest earned on savings accounts, CDs, money market accounts or bonds
• Capital gains from selling assets

Rental Income

• Net income from rental properties after deducting necessary expenses

Retirement and Pension Income

• Social Security benefits (retirement, not disability)
• Pension distributions
• IRA or 401(k) withdrawals

Government Benefits

• Unemployment compensation
• Workers' compensation benefits
• Veteran's benefits

Support Payments

• Alimony or spousal support received from a previous marriage

Trust Income

• Distributions from trusts or estates

Gifts and Prizes

• Regular gifts of cash or other assets, especially those recurring monetary gifts from family
• Lottery winnings or other prize money

Job Perks

• Company car for personal use
• Housing allowances or free housing provided by an employer

Disability Payments

• State disability insurance benefits
• Private disability insurance payments

Other Sources

• Royalties from intellectual property
• Severance pay
• Recurring monetary gifts from family members

Courts look for regular and consistent income sources. Sometimes, they may consider a parent's earning capacity rather than actual earnings, especially if they're voluntarily unemployed or underemployed. The court may average income over time for parents with irregular income (like seasonal workers or those on commission).

Some forms of non-taxable income, like certain disability benefits, may be "grossed up" for child support calculations.

Child support received for other children generally isn't considered income for calculating support in a new case. Public assistance programs like CalWORKs typically are not included as income.

Parents may need to provide various documents to verify income, including tax returns, pay stubs, bank statements, business financial statements, and 1099 forms for independent contractors.

How does self-employment or business ownership affect child support calculations in California?

Self-employment and business ownership present challenges in California child support calculations due to the complex nature of business income and expenses. Here's how these situations are typically handled:

Determining Actual Income

• Courts start with the total revenue generated by the business (gross receipts).
• Legitimate business expenses are then deducted.
• The resulting figure is considered the self-employed parent's income for support purposes.

Scrutiny of Business Expenses

• Courts closely examine business deductions to ensure they're necessary and reasonable.
• Expenses that blur the line between business and personal use (like vehicle expenses, travel, or meals) often face extra scrutiny.
• While depreciation is a legitimate business expense, courts may add it back to income for support calculations.

Cash Businesses

• Cash-intensive businesses may face additional scrutiny due to the potential for underreporting income.
• Courts may consider the parent's lifestyle if it seems inconsistent with reported income.

Tax Returns vs. Actual Cash Flow

• While tax returns are a starting point, courts may look beyond them to determine actual available income.
• Certain deductions allowed for tax purposes may be added back for child support calculations.

Irregular or Seasonal Income

• For businesses with fluctuating income, courts often average income over a period (typically 12-24 months) to determine a representative figure.

Retained Earnings

• Courts may examine retained earnings to ensure business reinvestment isn't being prioritized over child support obligations.

Multiple Business Interests

• All business interests are typically considered, including partnerships, corporations, and sole proprietorships.

Potential Income

• If a parent isn't fully utilizing their business or professional skills, the court may impute income based on earning capacity.

Documentation Requirements

• Financial statements, including profit and loss statements, balance sheets, and cash flow statements, are often required.
• Business and personal bank records may be reviewed.
• Both personal and business tax returns are typically scrutinized.

Use of Experts

• In complex cases, forensic accountants may be employed to analyze business finances.
• Vocational evaluators might assess a parent's earning capacity in their field.

Next Steps

You have learned a lot about how income is determined for child support services. If you need an experienced family law firm to help you with your child support case, we are only a phone call or email away.