One method of calculating child support in a divorce is provided by New York laws. Basic Child Support is calculated by a statutory (DRL §240[1-b]) formula in New York. The formula has complex aspects which must be explained by your attorney, but in essence, the non-residential parent (who we will call the “payor”) must pay the residential parent (the “payee”) a percentage of the payor’s income.
The formula is based on combined parental income. The first step is calculated on combined income up to $141,000 as of 2014 (income above $141,000 is also considered, but on a more discretionary basis) multiplied by a percentage which is dependent on the number of children.
“Income” for child support purposes is calculated by subtracting FICA, Medicare and local income taxes (federal or state income taxes are not subtracted) from gross income (all earned and investment income is included).
The result of this formula is multiplied by one of the following percentages:
- 17% for 1 child
- 25% for 2 children
- 29% for 3 children
- 31% for 4 children
- 35% for 5 children
For example, if the payor earns $100,000 a year and has no local tax, but has FICA tax of $6,200 and Medicare tax of $1,450, child support would be calculated on $92,350. If there is one child, the support amount would be $15,699.50 representing 17% of child support income. Basic Child Support is payable in advance on a weekly or monthly basis.
In addition to the Basic Child Support amount calculated under the formula above, the following costs are pro-rated between the residential and non-residential parent:
- child care needed to permit the residential parent to work;
- health insurance premiums for the children; and
- uncovered medical expenses for the children.
In our example where the non-residential parent earns $100,000 (adjusted to $92,350), if the residential parent earns $50,000 (adjusted to $46,175), the pro-rata contributions for these additional costs would be paid 66.6% by the non-residential parent and 33.3% by the residential parent. A child care bill of $300 would be divided so that the residential parent would pay $100 and the non-residential parent $200.
While child care, medical insurance and uncovered medical expenses must be pro-rated between the parents under the statute, apportioning other expenses related to the children is discretionary. Thus, the costs for extra-curricular activities, tutors and private school tuition are not mandatory support items and the unique circumstances of the family are considered in determining whether parents must contribute.
In the Collaborative Divorce process, the statutory formula described above must be considered, but it does not blindly control the support package developed for a family.
For example, child support is not tax deductible by the payor and not included in the payee’s income for income tax purposes. This can have important consequences when structuring a support package because the payor cannot “write off” child support on a tax return.
In contrast, spousal maintenance (alimony) is tax deductible by the payor and included as income for the payee. If the payor is in a high tax bracket, carefully structuring the agreement for support can simultaneously increase the recipient’s spendable money and decrease the payor’s net payments.
This win-win result can only be accomplished through careful tax planning and analysis by legal and financial professionals working closely together to achieve the best possible result for the family.
The Collaborative Divorce process enables legal and financial experts to come together for the uniform purpose of protecting the post-divorce interests of every member of the family. While the above overview may help you understand the rudimentary calculations involved in child support obligations, there can be dozens of other issues which must be carefully analyzed with the help of your lawyer and financial specialist in determining the best child support amount.
Filed in: Finances and the Financial Neutral, Packages and Options