What Is My Income?

calculating Income

In the divorce cases we do, our attorneys often hear various forms of this question – how is my income calculated? This is usually in terms of figuring out child support and spousal support/maintenance obligations.

I often hear people ask whether we will be averaging their last two years or using their current income. For most support calculations, the ultimate question is really about what your income is going to be in the future. If we are looking at setting child support, we may be asking what your income is likely to be over the next two years (because it can be adjusted every two years). If we are looking at setting spousal support, we may be looking a bit farther into the future. But the question comes back to asking how much money are you going to have, or how much need for support are you going to have.

Of course looking at an income average or a current income is often the best way of estimating future income. For instance, if we have someone who is self-employed and whose income fluctuates greatly from year to year, we might use an income averaging approach. If they have made as much as $100,000 and as little as $30,000, but their average income is $60,000, then $60,000 MAY be the best figure to use for their anticipated income over the next several years. On the other hand, if they just doubled their income by purchasing a second multiflexthingamajig, then averaging past income may be wildly inaccurate and we would need to go to a more sophisticated analysis.

Next we have the person who has a regular salary. Typically looking at their current paystub is the best way of estimating the income going forward. One thing we don’t generally do is impute raises that have not happened as they are too uncertain. If you have a steady income, it doesn’t really matter what your past income was, what matters is what you were earning now. You may have spent five years flipping burgers at $10 an hour, but if you finally landed your dream job designing the burgers of the future at $50 an hour, then probably the best guess at your income going forward is $50 per hour.

Another element comes into play for the underemployed person. Let’s say you have that cushy job making $50 per hour designing burgers, but choose to only work 20 hours per week. In that case you may still have the income imputed to you that you would make if you worked 40 hours per week. There is a principle that you don’t get out of support obligations, or get extra support, because you choose not to work full time. That of course takes us into the sticky wicket of what is voluntary underemployment and what is involuntary. The burden will be on you to show that you do not have the opportunity to work more hours/make more money, possibly even in another job.

I was recently asked the interesting question: if my income is increasing now, why don’t they just consider the level of income I had during the marriage rather than the income I will have after the marriage is over? There is a logic to treating income like property – what is acquired during the marriage is divided and what is acquired after the marriage is kept separate. However, I think that the logic used here has more to do with the idea that the career that led to the future ability to earn was built during the marriage. It also considers need and ability to pay, which are really about the situation going forward – about meeting real bills with real dollars. Keep in mind that future income could be less as well as more. Just because you earned $100,000 per year during the marriage, but recently were injured and are getting disability of $25,000, is it fair to still set your obligations based on $100,000?

That’s all for now – ya’ll stay safe out there!