How Do Tax Laws Affect Child Support Calculations?

Figuring out your income for tax purposes is not necessarily the same as for child support purposes.
In a recent New Hampshire case, the father testified about a form K-1 that he received from a limited liability corporation in which he owned an interest. The K-1 showed taxable income to the father of $75,000 per year. However, the father testified - without contradiction - that he actually received only $2,000 per month of this money. The rest, he said, was used for mortgage payments on some real estate the LLC owned.

The court was asked to decide whether the entire $75,000 should be counted as income for child support purposes, or just the $24,000 per year the father actually received. The court decided to include only the $24,000 because child support is supposed to be based on income actually received, not income for tax purposes. The court said, "how federal income taxation statutes define 'income' is of little relevance to our interpretation of gross income under the child support guidelines."

In another recent case from California, the tax laws cut in the opposite direction. The father wanted to deduct depreciation from the income he received from rental property to lower the amount of income he received for child support calculations. But the court refused to let the father make that deduction because depreciation had nothing to do with the income the father actually received.

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