Editor’s Note: Leslie Gibbs Van Der Have is a member of the Family Law and Litigation Practice Groups at Ward and Smith, P.A.

The child support laws in North Carolina require uniform statewide presumptive guidelines for determining child support. The Child Support Guidelines (“Guidelines”) were reviewed and revised recently to make sure that their intended purpose – to provide adequate and equitable child support – is being met. The revised guidelines became effective January 1, 2011, and apply to child support actions heard on or after that date. A driving force behind the calculation of child support is the parents’ current incomes at the time the obligation is established.

What is the general analysis for determining income?

The “income shares” model was used to construct the guidelines. According to the Guidelines, this model is “based on the concept that child support is a shared parental obligation and that a child should receive the same proportion of parental income he or she would have received if the child’s parents lived together.” Since the model is designed to apportion parental income, the parents’ current incomes must be analyzed and determined.

The definition of “income” provided in the guidelines is essentially “gross income” – that is, “income before deductions for federal or state income taxes, Social Security or Medicare taxes, health insurance premiums, retirement contributions, or other amounts withheld from income.” This refers to actual gross income from any source, and the guidelines contain an enumerated list of various types of income to be included in the income calculation. Examples include, but are not limited to, income from:

  • Employment or self-employment;
  • Ownership or operation of a business;
  • Rental of property;
  • Retirement or pension plans or accounts;
  • Trusts or annuities;
  • Capital gains;
  • Social Security, workers’ compensation, or unemployment insurance benefits; and,
  • Disability pay.

The Guidelines also provide direction about income that is received on an irregular, non-recurring, or one-time basis, and about the imputation of income, such as when a party is voluntarily underemployed or unemployed for the bad faith purpose of avoiding or minimizing child support obligations.

Are parents who are self-employed or business owners subject to any different rules about income?

One source of income that is given special attention in the Guidelines is gross income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely-held corporation. A careful review of income and expenses is warranted to assess what level of gross income is actually available to satisfy a child support obligation. Many times the income for purposes of child support is different from the business income for tax purposes, and this reality is contemplated by the Guidelines.

For parents who are self-employed or business owners, income is defined in the Guidelines as “gross receipts minus ordinary and necessary expenses required for self-employment or business operation.” Certain allowances for tax purposes, such as the accelerated component of depreciation expenses, are not considered to be ordinary and necessary business expenses in the computation of income for child support purposes.

Whether retained earnings of a corporation are attributed as income to a parent for child support purposes will depend in part on whether the relevant parent controls the decision on the distribution of earnings. The concern is that parents should not be allowed to use their control over a corporation or business to direct the distribution of corporate assets and earnings and thereby avoid income for purposes of child support. However, there may be instances where there is a legitimate business reason for the retention of earnings and, therefore, in those situations, retained earnings should not be considered for purposes of child support.

Determining income from self-employment or business operations is a multi-faceted process and likely will require an in-depth analysis.

Are there certain exclusions from income?

The revised Guidelines specifically exclude the following from income for child support purposes:

• Child support payments received on behalf of a child other than the child for whom support is being sought in the present action;

• Employer contributions toward future Social Security and Medicare payments for an employee;

• Amounts that are paid by a parent’s employer directly to a third party or entity for health, disability, or life insurance and that are not withheld or deducted from the parent’s wages, salary, or pay; and,

• Amounts that are paid by a parent’s employer directly to a third party or entity for retirement benefits and are not withheld or deducted from the parent’s wages, salary or pay.

However, if it is determined that one of the above employer contributions in fact immediately supports the employee-parent in a way that is “akin to income,” the contributions could be included in income. For example, if the amount of an employer-paid retirement contribution is such that it suggests the inappropriate sheltering of income, it is possible that the contribution could be included in the employee-parent’s income for child support purposes, or that the excessive employer retirement contribution could be used as the basis for deviating from the presumptive child support obligation.

Furthermore, the Guidelines provide that if an employment benefit is significant and reduces the employee-parent’s living expenses, the value of the benefit should be included as income for child support purposes. Such benefits could include employer-subsidized housing, expense reimbursements, or the use of a company car for personal transportation. This is because the receipt of the benefit reduces the employee-parent’s ordinarily expected living expenses and enhances the parent’s present ability to pay child support.

How is income verified?

Income is verified in child support actions through voluntary document production requirements
set forth in the Guidelines and in various local rules. Documentation and information relevant to child support also can be obtained through the compulsory discovery process of litigation. Such documentation includes pay stubs, employer statements, and tax returns. Self-employed parents must provide documentation reflecting business receipts and expenses.


Identifying sources and amounts of income from all sources for child support purposes is at times not as clear as it may seem at first blush. Analyzing the true income of both parents is a necessary process that can yield more significant support for the affected child or appropriately reduce the obligation for the affected parent. A copy of the revised Guidelines can be found at http://www.nccourts.org.

© 2011, Ward and Smith, P.A.

Ward and Smith, P.A. provides a multi-specialty approach to the representation of technology companies and their officers, directors, employees, and investors. Leslie Gibbs Van Der Have practices in the Family Law and Litigation Practice Groups where she represents clients in a variety of domestic matters. Comments or questions may be sent to lgv:@wardandsmith.com.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.