ABA Family Legal Guide

Family Law

3.4 Separation, Annulment, and Divorce

Child Support

When working with guideline formulas, how are the parents' incomes determined?

States vary, with some using the parents' net income, and others using the gross income. Gross income is the parents' income from all (or almost all) sources, including wages, investments, and other sources. Net income is equal to gross income minus federal and state income taxes, Social Security tax, Medicare tax, health insurance, and perhaps union dues. For self-employed persons, the determination of income may be complex. Courts will allow deductions of reasonable business expenses before determining net income. But courts may disallow unusually high business expenses and depreciation that reduce income artificially without hurting the parent's cash flow. Thus, certain expenses that are deductible for tax purposes may not be deductible from income for the purpose of setting child support.