In California, child support is calculated by a guideline formula, in which the key factors are each parent’s “net monthly disposable income” and each parent’s relative time over which the children are in their physical care (aka “timeshare”). Family Code §4055.
How does the court calculate “net monthly disposable income?” The determination of each parent’s “net disposable income” is arrived at by taking their “annual gross income,” adjusting by permissible deductions (such as mandatory retirement, or health insurance premium deductions), and dividing over 12 months.
The real question is what income is included in the “annual gross income.” The short answer is all income is income available for support, except when it isn’t.
Family Code §4058 defines “annual gross income” as “income from whatever source derived,” except where specifically excluded, including but not limited to:
commissions, salaries, royalties, wages, bonuses, rents, dividends, pensions, interest, trust income, annuities, workers’ compensation benefits, unemployment insurance benefits, disability insurance benefits, social security benefits, and spousal support actually received from a person not a party to the proceeding to establish a child support order under this article.
Parents often ask whether their “bonus” income or “overtime” income is correctly included in their “net monthly disposable income” when it is inconsistent, unreliable, or only received sporadically. Make no mistake that bonuses and overtime are included in income available for support.
The only instance where overtime or bonus income may be excluded is where there is admissible evidence to support that said overtime or bonuses are unlikely to continue in the future. County of Placer v. Andrade (1997) 55 Cal.App.4th 1393, 1396. In general, courts are very skeptical of claims that a parent is not likely to continue to receive overtime or bonuses, and counsel should be prepared to present credible evidence from the employer.
The most common method of inclusion of overtime and bonus income is to include that income in the parent’s average annual gross income. A less commonly used method is the Ostler/Smith method whereby the court excludes the bonus/overtime income from the calculation of a parent’s “annual gross income calculation;” however, assigns a percentage of all bonus/overtime income to be paid separately as child support to the other parent. In effect, the parent receiving the bonus/overtime income will have to pay the other parent the ordered percentage of any bonuses/overtime received, in addition to their regular monthly child support obligation.
The following is expressly excluded from a parent’s gross income for purposes of calculating child support:
- SSI (Supplemental Security Income) benefits (see Family Code §4058(c));
- Child support payments received by a parent (for children of this relationship and/or from another relationship) (see Family Code §4058(c));
- Income from public assistance programs (eligibility for which is based on determination of need) (see Family Code §4058(c));
- Spousal support received from the other party to the action (spousal support received from a person other than the other party in the child support case is expressly included) (see Family Code §4058(a)(1); Marriage of Corman (1997) 59 Cal.App.4th 1492, 1499.)
- Income subject to repayment (ie. Student loans) (see Marriage of Rocha (1998) 68 Cal.App.4th 514, 517-519.);
- Attorney Fees paid by a third party directly to attorney on parent’s behalf (see M.S. v. O.S. (2009) 176 Cal.App.4th 548, 557.);
One time (or sporadic) gifts or inheritances are excluded from a parent’s gross income for purposes of child support; however, interest, rents and dividends earned from gifts and inheritances are income to be included in calculating child support. There is some argument in favor of treating gifts and inheritances in a parent’s income available for support under extreme circumstances (such as an underemployed parent hiding behind very wealthy family). (Marriage of Shulze (1997) 60 Cal.App.4th 519, 529.)
Gifts that are periodic and regular in nature of the payments have been found to be income available for child support. Marriage of Alter (2009) 171 Cal.App.4th 718. Inclusion of regular gifts is at the discretion of the court, and the outcome can be very uncertain. In the Alter case, Husband received regular monthly “gifts” from his mother of $3,000/month for many years, increased to $6,000/month (of which he used $3,000 to pay rent back to his mother for the house she had purchased for him to live in). In the Anna M. v. Jeffrey E. case the court found that regular monthly expenses of approximately $33,000 paid on the mother’s behalf by a friend ($10,000/month rent, cost of live-in help, all food and household goods, cost of nanny, two vehicles for mother’s use and use of a credit card) were not includable as income to the mother in the calculation of child support. Anna M. v. Jeffrey E. (2017) WL 105905. The court found that there was sufficient evidence to conclude that the gifts were not a regular, recurrent, monetary benefit. The Anna M. case distinguished the gifts from the Alter case on two basis: (1) the gifts had not been paid for “years”; and (2) the giftor was a legal stranger to the mother unlike the giftor in Alter, who was husband’s mother.
Employment benefits such as rent and mortgage free housing may also be considered as income for calculation of child support. Stewart v. Gomez (1996) 47 Cal.App.4th 1748.
In the case of a parent who owns their own business and has control of their income and is able to structure income and the payment of personal expenses through the business, the court may add back business-paid personal expenses in the calculation of a parent’s gross income for child support. Marriage of Chakko (2004) Cal.App.4th 104, 109.
The discussion of what is “income” available for child support can be very complex, and goes well beyond the scope of this article. While parents are entitled to “guideline” child support in the State of California, the data used to calculate a guideline is very much at the court’s discretion. Thus, attention to detail and zealous advocacy is crucial in the litigation of child support.