This post is the second in our series about what goes into calculating child support. This blog focuses on what is considered income and how it impacts child support awards. To read the first blog, click here.
Child support isn’t an exact science—it’s a balancing act of all the different financial factors that go into raising a child. It never looks the same between families because every family is different.
Numerous factors are part of this balancing act: parental finances, parenting time, age and number of children, childcare costs, healthcare costs, and other child support obligations all need to be considered.
No one factor outweighs the others, but some can feel more pressing than others to figure out. One factor that we get asked about every day is how household income impacts child support calculations.
How child support is calculated: a refresher
New Jersey uses a set formula for establishing basic child support. If you and your co-parent create a child support agreement through mediation or alternate dispute resolution (ADR), these guidelines can be helpful, but they are simply an (optional) starting point.
If you are unable to come to an agreement, and the courts need to establish the support obligation, your child support order will be based on New Jersey guidelines.
Child support is calculated by considering many factors, including:
- Parental finances
- Child custody agreement or order
- The age and number of children
- Cost of childcare
- Child(ren)’s existing healthcare costs
- Any existing child support obligations from prior relationships or other dependant deductions
As stated above, income carries a lot of weight in child support calculations, but child support considers many factors. Just because one parent is a high earner doesn’t necessarily mean they will have a high child support obligation. Meanwhile, in some situations, a parent may still owe child support even if they have primary custody of the child or children.
Because child support outcomes vary so widely, it’s essential to work closely with your child support attorney to ensure you have the fullest possible understanding of your situation and the options available to you.
What does “income” mean for child support purposes in New Jersey (and why is it important)?
In New Jersey, child support guidelines consider a parent’s income when coming up with the final number. But “income” can be complicated to calculate if you are not a W-2 earner.
While parents will need to provide their gross income, the courts take into consideration a parent’s different sources of income and tax consequences associated with that income when calculating support.
Determining net income involves calculating gross income and subtracting mandatory payments such as:
- State and federal income taxes
- Social Security and Medicare taxes
- Payroll deductions for retirement, disability insurance, or union dues
What is considered income for child support purposes?
Income is more than just what you earn in your salary or wages. For child support purposes, income will also include:
- Tips, commissions, bonuses, profit-sharing, severance pay or deferred compensation
- Overtime income, or income from any second jobs or contractual agreements
- Income from real estate property, investments, trusts or estates, capital gains, or annuities
- Pension income
- Military benefits
- Educational grants, fellowships, or any subsidies available for personal living and educational expenses
- Alimony
- Royalties
- Gifts and prizes, such as gambling or lottery winnings
- Social Security disability, workers’ compensation, strike pay, or unemployment benefits
- Employment “perks” such as free housing, expense reimbursement, or a company car (because they reduce personal living expenses)
What isn’t considered income for child support purposes?
While almost all types of income are factored in when calculating child support, there are some exclusions.
For example, a parent’s net income is used to determine child support, which means that the court does not take into account funds that are unavailable to the parent.
Notably, in New Jersey, while social security disability is considered income for child support purposes, Supplemental Security Income (SSI)—which has a separate government calculation based on significant financial stress—is not considered income for child support purposes.
Child Support Guidelines worksheets and how income factors into calculating child support
If you and your co-parent decide on a child support obligation independently, you can (generally) use whatever criteria you deem reasonable to guide your decisions. Income is a significant component, but you can find other ways to meet your children’s needs and create support obligations.
However, if child support is determined through the courts, New Jersey requires families to complete Child Support Guideline worksheets as part of the process. These are used to calculate child support based on, among other things, income.
There are two types of worksheets, one for sole parenting and the other for shared parenting.
Sole parenting worksheets apply in the following circumstances:
- No time sharing, i.e., the child resides with one parent, 100% of the time.
- One parent has less than 28% of overnight parenting time (less than two nights per week).
- There are multiple children, and at least one child resides with each parent.
- Shared parenting situations in which income for the Parent of Primary Residence (PPR) falls below a set amount.
On the other hand, the shared parenting worksheet will apply if:
- The child resides with the Parent of Alternate Residence (PAR) for at least two or more overnights per week (or 52 overnights per year), excluding vacations; and
- The PAR has separate living accommodations for the child in their household
The worksheets distinguish between gross income (total earnings before deductions), net income (income after taxes and other mandatory deductions), and additional expenses. They also consider regular expenses incurred for the child’s benefit, such as health insurance, education costs, and more.
Parents are responsible for reporting their income wholly and accurately. If a party is suspected of having underreported their income, it may be necessary to subpoena bank accounts, pursue a forensic audit, or take other legal measures to ensure a fair calculation.
Legal assistance is available in the child support process
Many factors go into the child support determination process, whether you use mediation, litigation, or a combination of both to reach a settlement. An attorney with experience in child support can help you navigate the process from start to finish and prepare documentation, strategy, and arguments for the court.
The family law team at Jacobs Berger employs our “de-stress doctrine” to more than divorce—we strive to minimize stress through all areas of family law, including child support. Our goal for each client is to help them reach agreements that are future-focused and centered on their child’s best interests.
Contact our team to coordinate your strategy session.
