When spouses separate it’s important to determine each spouse’s income in order to apply the Federal Child Support Guidelines and the Spousal Support Advisory Guidelines. The usual practice is to use the spouses’ incomes as stated on line 150 of their tax returns. This is their gross income from all sources before tax is deducted.
If a spouse is self-employed, their line 150 income may not represent their true income because they may deducting business expenses from that income. Some of these expenses will be real expenses required to run their business but often this can include personal expenses as well. The most common personal expenses a spouse will deduct on their tax return as business expenses are the following:
• All automobile expenses, not just the percentage that the vehicle is used for business purposes
• All cell phone expenses
• All meals, entertainment and travel expenses
• Home office expenses
• Depreciation or amortization
It’s important to look at all of the expenses that have been deducted and determine what percentage of each expense is really a personal expense. These personal expenses are then added back to the spouse’s income in order to determine their income for calculating spousal support and child support pursuant to the guidelines.
Deborah A. Todd