Imputing Income for Calculating Child Support

When a married couple with children decides to get a divorce, the determination of child support is one of the issues that must be resolved. All parents have a legal responsibility to provide sufficient financial support for their children to secure basic necessities like food and clothing. This legal duty continues until the child reaches the age of 18, regardless of the parents’ marital status.

When the parents of a minor child separate, both parents are legally obligated to financially support their children’s needs. However, typically courts impose child support on the parent with more financial resources or who doesn’t regularly live with the child after separation. That is because the goal of child support is to ensure that a child whose parents are divorced or otherwise separated has the same financial resources as they would have if their parents still lived in one household.

Calculating Child Support

Under California law, courts are required to refer to certain guidelines listed in the California Family Code when determining the amount of child support a parent owes. Section 4055 of the Family Code provides a formula for calculating child support based on the income and expenses of the parents.

Under Family Code § 4055, courts combine the total net monthly disposable income (NMI) of the parents and multiply the sum by the percentage of time the higher-earning parent will spend with the child. Courts will then take the resulting figure and subtract it from the higher-earning parent’s NMI and multiply it by a percentage representing the income allocated for child support:

[Higher earner’s NMI]

– [(Both parents’ NMI) x (% of higher earner’s custody time)]

x [% of income allocated for child support]

= Child Support

Things Included in a Parent’s Net Monthly Disposable Income

Like other matters concerning minor children in a divorce case, California courts determining issues of child support with the child’s best interest in mind. The child support formula is based on figures representing the parents’ respective incomes.

California Family Code § 4058 broadly defines “income” for purposes of calculating child support to mean “income from whatever source derived. This includes salaries, income derived from property—such as rents and royalties—property and assets.

Imputation of Income

California law also recognizes that a parents’ income does not include specific property, but also the potential value of certain assets as well. Family Code § 4058 also authorizes courts to “consider the earning capacity of a parent in lieu of the parent’s income consistent with the best interests of the children.”

Courts have interpreted the phrase “earning capacity” broadly as well, holding that the phrase not only includes a person’s ability to earn a living but anything a parent earns as compensation for their labor or use of an asset as the capital as well.

These principles provide the legal basis for imputing income for purposes of calculating child support in certain circumstances. For example, if a parent has the education, training, and opportunity to earn $100,000 annually, but takes a job that pays $75,000, a court may base their child support obligation on the $100,000 figure. Courts reasoned that parents should consider their parental obligations when deciding to work at less than full earning capacity.

When determining whether to impute income for under-earning parents, courts consider the following factors:

  • The parent’s ability to work in light of their age, skill, education, health, background, and experience
  • The parent’s good faith efforts and meaningful attempts at securing employment comparable to their abilities
  • Opportunities for work in the job market

The earning capacity of an under-earning parent is not the only instance where a court will impute income to calculate child support. California law also empowers courts to determine a parent’s income based on underemployed income-producing assets.

For example, if a parent owns a property with a fair monthly rental value of $2,500 but rents it out for $1,800, a court can use the property’s fair rental value when deriving a parent’s net monthly income when it comes to calculating child support.

Courts have imputed the income of the following assets for determining child support:

  • Rental property
  • Investments
  • The overall value of stock portfolios
  • Home equity

The important lesson of imputing income is that parents should prioritize their child’s needs over their personal employment and lifestyle preferences. Otherwise, the court may do it for them.

You Can Count on Hanson, Gorian, Bradford & Hanich for Legal Counsel

If you are concerned about your financial interests when it comes to a family law matter such as child support, you should seek the advice of a dedicated legal professional from Hanson, Gorian, Bradford & Hanich. Our attorneys have dedicated years of their practice to guiding families in California through the complexities of family law.

If you want to get a better understanding of your legal rights and options, contact us online or call us at (951) 506-6654 today.


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