Definition of Income Used in Child Support Calculations

In our second Divorce Friday podcast episode in our 2021 Child Support series, Diane and Chris have the pleasure of hosting David Kellem to address the determination of income for child support. A lawyer and mediator at Kellem Mahoney Family Law and Mediation Group in Hingham, MA. David spent 25 years representing clients in a wide range of areas that relate to family law, including divorce, real estate, business representation, litigation, and wills and estates. One of the critical aspects of the Child Support guidelines is that the financial end result is that one parent will pay money to the other. Usually, that is a factor of the difference in incomes of each parent and many other factors addressed in this and future episodes of Divorce Friday. For people who have a regular job, income is not difficult to determine: it is simply the salary you get for your job that ultimately results in a W2 sent in January to figure out our tax return. But, of course, there can be complications. For example, people can get bonuses, or they can benefit from executive compensation programs. Or they can have more than one job. Things can get complicated when one of the parties is a business owner. Determining income in this kind of case is not always straightforward. That is because business owners have the opportunity to affect their income depending on their goals. For example, there are business expenses that provide a personal benefit that is not included in the business owner's income. A simple example is the cell phone expense: it may well serve a business purpose, but the business owner also receives personal calls. Depreciation is another typical example, especially with rental properties. Depreciation is a non-cash expense that the IRS allows business owners to take. It reduces the apparent income of the business owner and, thus, can have an impact on the amount of child support that will be paid. Therefore, incomes may need to be adjusted to arrive at a fair representation of a couple’s resources and a fair amount of child support. Listen to this fascinating discussion of determining income in divorce!