If you and your child's other parent don't live under the same roof, how your children's living expenses and financial support are divided can be a source of conflict. Whether you are pursuing child support alone, or as part of a divorce or custody action, you may wonder what counts as income in calculating child support. Understanding how this calculation is done can make it easier to estimate what funds you will have available to provide for their care.
How Michigan Courts Calculate Child Support
Any time the care and support of children comes before the Michigan courts, judges have the authority, and in many cases the duty, to order parents to contribute to their children's financial support. But not all parents have the same financial means to support their children. To make sure the amounts paid by parents are fair and consistent, the Michigan legislature has mandated that courts apply the Michigan Child Support Formula (MCSF) unless doing so results in an unfair or inappropriate outcome (such as when a child's special needs result in extraordinary medical or educational expenses).
At the center of the MCSF is the assumption that each parent can and should contribute to the financial needs of their children in proportion to their respective income. The formula assumes that when the children are in a parent's care, he or she is paying for their expenses directly, by providing housing, food, clothing, medications, toys, and all the other things children need to thrive. To account for this, the MSCF includes an “offset” for the number of overnights the children spend with each parent. That means the two most important factors in calculating child support are (1) income and (2) overnights.
What Counts as Income in Calculating Child Support
If you have traditional employment, determining the appropriate amount of income for calculating child support may be as easy as looking at your most recent W-2 or tax return. But for many parents, calculating income is far more complicated. That's because the definition of “income” under the Michigan Child Support Formula is very broad, including just about any funds parents bring in, even most government benefits. Comparatively small sources of income, like driving for ride-share companies or selling hobby items, can shift the child support calculation if the totals add up over time.
Income for child support purposes can also include some unexpected forms of compensation. For example, if a parent receives in-kind compensation like access to a company car or travel expenses, has an established (and profitable) pattern of gambling winnings, or receives regular disbursements from stocks or a family trust, those gains can be included in the calculation alongside regular wages or salary. Even spousal support can be included if it is paid by someone other than the child's other parent.
Potential Income for Unemployed Parents
But what about stay-at-home parents or disabled parties? Michigan courts don't just excuse unemployed parents from contributing to their children's care. If a parent has the ability to work, the Court can “impute” a potential income to that parent based on his or her education, work history, physical abilities, and the jobs available in the area. This potential income rule applies even if a parent is voluntarily “under-employed” working part-time by choice. Depending on the age of the children and the costs of childcare (some of which can be compensated under the MCSF), a parent may still choose to remain unemployed, but the Michigan Child Support Formula says they will not receive a financial benefit from doing so.
Similarly, disabled parents may be required to apply for Social Security Disability Insurance, Veterans' Benefits, or other forms of welfare. Many of these programs include additional funds for dependents. Receiving those benefits will ensure that disabled parents are contributing to their child's expenses, even if they are physically or mentally unable to work in a traditional sense.
Calculating Income for Self-Employed Parents
If one or both parents are self-employed or a business owner in control of his or her own compensation, calculating income for child support purposes can get especially difficult. The law is designed to prevent parents from redistributing their income or avoiding taking a salary simply to avoid child support obligations. It allows the Michigan courts to add back in tax depreciation, alternative compensation, benefits, and other tools business owners use to reduce their taxable income. However, determining the correct amount of income in these cases can require significantly more work. Sometimes, you may even need to hire a financial expert to determine what a similar professional should be earning if paid a fair market rate.
Get Help Calculating Child Support from a Michigan Family Lawyer
At Bebout, Potere, Cox & Bennion, P.C., we care about you and your family. We help individuals and families in Rochester Hills, Rochester, Troy, Lake Orion, Oxford, Oakland County, Macomb County and throughout Southeast Michigan. We can help you determine both parents' appropriate income and apply the Michigan Child Support Formula to ensure that your children have the child support they need to thrive. Call us at 248-651-4114 or contact us here to speak to an attorney.
