How To Calculate Child Support
In California child support is calculated using an algebraic formula known as the State Uniform Guideline. The Guideline is expressed in Family Code Section 4055 as
CS = K[HN – (H%)(TN)]
CS = child support amount.
K = amount of both parents’ income to be allocated for child support.
HN = high earner’s net monthly disposable income.
H% = approximate percentage of time that the high earner will have primary physical responsibility for the children compared to the other parent.
TN = total net monthly disposable income of both parties.
Policy Behind Child Support
The Guideline is designed to accomplish several policy goals codified in Family Code Section 4053. While the codified policies further what the legislature envisioned as adequate child support, a short review of the policies shed light on how child support awards can be onerous for the working breadwinner who must dedicate their time to work.
Some of the policies identified in Section 4053 are as follow:
- The guideline seeks to place the interests of the children as California’s top priority.
- Children should share in the standard of living of both parents. Therefore, child support may appropriately improve the standard of living of the custodial parent to improve the lives of the children.
- It is presumed that a parent with primary physical responsibility for the children contributes a significant portion of available resources for the support of the children.
- Child support orders must ensure that children receive sufficient support reflective of California’s high standard of living and high costs of raising children.
- The Guideline is presumptively correct in all cases.
In other words, the policies and their execution through the State Uniform Guideline weigh against the financial interests of the high-earning parent who must dedicate their time to work and favor the stay-at-home parent. After all, the policies state that child support awards may appropriately raise the standard of living of the custodial stay-at-home parent, thereby allowing the children to “share” in the standard of living of both parents.
(TN) Net-Monthly Disposable Income
The Guideline requires the court to calculate each parent’s net monthly disposable income by determining each parent’s gross income then subtracting allowable deductions. Unfortunately for the high-earning parent, and fortunately for the stay-at-home parent, gross income is broadly defined while allowable deductions are specific and few.
Gross income is broadly defined as income from whatever source derived, except income that is legally excluded from the child support calculation. In an “including but not limited to” fashion the Family Code Section 4058 requires the following to be included as gross income:
- Wages, salaries, commissions, bonuses
- Self employment income, such as gross receipts minus expenses required for the operation of the business
- Pensions, trust income, annuities, social security benefits
- Workers compensation benefits, unemployment insurance benefits, disability insurance benefits
- Spousal support actually received from a person not a party to the present proceedings.
Apart from the forms of income that are specifically identified in the Family Code as part of gross income, the court may impute income from certain assets and circumstances in its discretion. For instance, the court may replace an allegedly underemployed or unemployed parent’s actual income with their “earning capacity” upon a showing that the parent has the ability and opportunity to work to produce more income. Likewise, the court may impute income from underutilized income-producing assets such as vacant real estate holdings.
Gross income does not include child support payments received; spousal support received from a party to the proceeding; public assistance that is based on need (although social security retirement benefits are included in gross income); and most gifts.
Only certain deductions from gross income are allowed by the Family Code when determining Net Monthly Disposable Income. These allowed deductions include (1) federal and state taxes actually payable (not necessarily the taxes withheld from a paycheck), (2) FICA contributions, (3) California State disability insurance premiums, (4) health insurance for the parent and their children, (5) mandatory retirement benefits and union dues required as a condition of employment, (6) child and spousal support actually paid, and (7) a hardship deduction if a parent experienced extreme financial hardship as a result of extraordinary health expenses or uninsured catastrophic loss.