Dividing Childcare Costs According to the Child Support Guidelines

Oftentimes I am asked how divorcing or divorced parents in New Jersey divide the bills that they once might have paid from pooled income in a joint bank account. For instance, how is work-related childcare going to be paid for in the future when the divorce is long in the rearview mirror? There are many points to consider when determining the answer, including, but not limited to, the New Jersey child support guidelines, the parties’ financial circumstances (especially in high income and high asset cases), the history of the children’s attendance at daycare, use of a baby-sitter or enrollment in day-camp, and more.

The child support guidelines are a mathematical formula that courts rely upon in calculating an appropriate child support obligation. The formula is based on research as to what intact families spend on their children, depending on that family’s level of income and the number of children in the home. The philosophy behind courts using the child support guidelines is that “(1) child support is a continuous duty of both parents; (2) children are entitled to share in the current income of both parents; and (3) children should not be the economic victims of divorce or out-of-wedlock birth.” (Appendix IX-A to the Rules of Court).

The chief considerations in the guidelines are each parent’s income, and the amount of parenting time each parent has with the child/children. Gross income is the starting point for the guidelines and taxes are taken into consideration thereafter, but there are numerous factors that impact a parent’s income. Gross income can include earnings from employment, interest earned from investments, and income imputed by a court (among many other categories). If a parent has mandatory deductions from their paychecks (such as a police officer having mandatory pension contributions and union dues) those deductions will be subtracted from that parent’s income in the guidelines. Other items factored into the guidelines include the payment of alimony from one parent to the other; child support paid for other children with a different parent; or an “other dependent deduction” for other children who are legal dependents of one of the parents. If one parent receives certain government benefits for the child such as Social Security Retirement or adoption subsidies, those will also be considered as income within the context of the child support guidelines.

How do childcare costs factor into all of this? Childcare costs are deemed large, variable expenses and therefore, they were not automatically included in the underlying amounts of what intact families spend on their children. If costs are incurred by one parent as work-related childcare, then the net cost of that childcare (after considering any tax credit) can be factored into the child support guidelines. However, since childcare programs and the family’s needs may change over time, parents may choose to not have such costs included in the guidelines, and instead they may choose to divide the costs pursuant to the “line 7 income percentages.” Although there may be circumstances meriting a different payment arrangement, the line 7 percentages are typically a good starting point and are often relied upon by courts in rendering a decision on this type of issue.

Each of the factors mentioned above (such as gross income and taxes) is entered into a specified numbered line in the child support equation. Line 7 of the guidelines tells us each parent’s share of the total income available to support the child, after taking into account the following categories, which may be added or subtracted to each parent’s column as appropriate:

  1. Gross taxable income
    1. Mandatory retirement contributions (non-taxable)
    2. Alimony paid (current or past relationships)
    3. Alimony received (current or past relationships)
  2. Adjusted Gross Income
    1. Federal, State, and local income taxes
    2. Prior child support orders (past relationships)
    3. Mandatory union dues
    4. Other dependent deduction
  3. Net taxable income
  4. Non-taxable income
  5. Government (non-means tested) benefits for the child
  6. Net income

After those 6 categories are calculated based on the family’s circumstances, we can then figure out each parent’s “line 7” percentage of income. This is important because divorcing/divorced parents should make an educated decision regarding how to divide costs such as daycare, babysitting, or camp and should not simply ask “how much does each parent make.” If one parent earns $25,000 and the other parent earns $75,000, the “line 7 percentage” may not end up being 25/75 after considering all the factors above.

Indeed, considering the line 7 percentage is one piece of a puzzle in high income and high asset divorces. The underlying research for the child support guidelines did not include reliable economic data for parents earning in excess of $187,200 net per year. Therefore, courts must look at statutory factors and case law regarding the child’s needs in setting child support (and the division of child-related expenses) for high-income families. Another scenario for deviation from line 7 percentages is if the parents’ assets were divided in such a way that one parent received a lion’s share of investments while the other parent received cash.

There are dozens upon dozens of cases and statues that address the child support guidelines and the nuances that affect them. If you have questions about dividing child-related costs and other child-support issues, Ziegler & Resnick LLC can assist you in properly addressing your legal needs.

Contact us at (973) 878-4373 to schedule a consultation.

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