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What does Actual Income Mean? |
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What Is a Person’s Actual Income?
Although there are variations in every State (and it is imperative that you check the Guidelines in your State), the basic themes are similar. My reference is to a “typical” format, because my purpose is to give you enough information to ask the right questions in your own State. Most Guidelines begin with a definition of what constitutes "actual income":
- "Actual income" means income from any source. (so the rental from the house your spouse owned before the marriage is counted).
- For incomes from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely held corporation,
- "Actual income" means gross receipts minus ordinary and necessary expenses required to produce income. (But what if he/she always deducts the car expense, the cost of the magazines you read at home, depreciation on the typewriters they use at the office, their entertainment?) 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.
"Actual income" includes:
- Salaries
- Wages
- Commissions
- Bonuses
- Dividend income
- Pension income (So if your spouse is retired from the military, even if all their time was put in before your marriage, it is included)
- Interest income
- Trust income (even though his grandmother set up the trust 15 years before your marriage)
- Annunity income
- Social Security benefits
- Workers' Compensation Benefits (if your spouse can't work at all, their benefits still count as income to be taken into consideration in calculating child support)
- Unemployment insurance benefits (So if he/she is out of work and have rent of $800.00 to pay, their $800.00 in unemployment counts as income, so the children receive something before your unemployed spouse pays their rent)
- Disability insurance benefits
- Alimony or maintenance received; and
- Expense reimbursements or in-kind payments received by a parent in the course of employment, self employment or operation of a business to the extent the reimbursements or payments reduce the parent's personal living expenses.
Based on the circumstances of the case, the court may consider the following
items as actual income:
- Severance pay; (If your spouse received 3 months of pay when a job was terminated for cause, it MAY (not must) be taken into account
- Capital gains; (If your spouse sold a vacation property last year, the capital gain of $40,000.00 which was reported on last year’s tax return MAY (not must be) taken into account in the calculation.
- Gifts or Prizes
"Actual income" does not include benefits received from means-tested public assistance programs, including aid to Families with Dependent Children, Supplemental Security Income, food stamps and General Public Assistance.
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