What Is Net Disposable Income for Child Support Purposes?
Ultimately the statewide formula derives a "net disposable income"
number that is "tax-effected" by subtracting standardized deductions
from a party's gross income. This section is significant because child
support is supposed to be determined based upon net, after-tax earnings
(i.e., net "disposable"). It is critical that the correct tax
filing assumptions (i.e., married filing jointly, separately, single,
or head of household) are used by family courts because otherwise the
net disposable amounts will be skewed in ways that can result in too much,
or too little, child support when compared against what should have been ordered.
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CALIFORNIA FAMILY CODE
COURT-ORDERED CHILD SUPPORT
NET DISPOSABLE INCOME
Family Code Section 4059
The annual net disposable income of each parent shall be computed by deducting
from his or her annual gross income the actual amounts attributable to
the following items or other items permitted under this article:
(a) The state and federal income tax liability resulting from the parties'
taxable income. Federal and state income tax deductions shall bear an
accurate relationship to the tax status of the parties (that is, single,
married, married filing separately, or head of household) and number of
dependents. State and federal income taxes shall be those actually payable
(not necessarily current withholding) after considering appropriate filing
status, all available exclusions, deductions, and credits. Unless the
parties stipulate otherwise, the tax effects of spousal support shall
not be considered in determining the net disposable income of the parties
for determining child support, but shall be considered in determining
spousal support consistent with Chapter 3 (commencing with
Section 4330) of Part 3.
(b) Deductions attributed to the employee's contribution or the self-employed
worker's contribution pursuant to the Federal Insurance Contributions
Act (FICA), or an amount not to exceed that allowed under FICA for persons
not subject to FICA, provided that the deducted amount is used to secure
retirement or disability benefits for the parent.
(c) Deductions for mandatory union dues and retirement benefits, provided
that they are required as a condition of employment.
(d) Deductions for health insurance or health plan premiums for the parent
and for any children the parent has an obligation to support and deductions
for state disability insurance premiums.
(e) Any child or spousal support actually being paid by the parent pursuant
to a court order, to or for the benefit of any person who is not a subject
of the order to be established by the court. In the absence of a court
order, any child support actually being paid, not to exceed the amount
established by the guideline, for natural or adopted children of the parent
not residing in that parent's home, who are not the subject of the
order to be established by the court, and of whom the parent has a duty
of support. Unless the parent proves payment of the support, no deduction
shall be allowed under this subdivision.
(f) Job-related expenses, if allowed by the court after consideration of
whether the expenses are necessary, the benefit to the employee, and any
other relevant facts.
(g) A deduction for hardship, as defined by Sections 4070 to 4073, inclusive,
and applicable published appellate court decisions. The amount of the
hardship shall not be deducted from the amount of child support, but shall
be deducted from the income of the party to whom it applies. In applying
any hardship under paragraph (2) of subdivision (a) of Section 4071, the
court shall seek to provide equity between competing child support orders.
The Judicial Council shall develop a formula for calculating the maximum
hardship deduction and shall submit it to the Legislature for its consideration
on or before July 1, 1995.