Michigan Child Support | Are Employment Perks Considered Income?

By: Dennis M. Germain, Michigan Family Law Attorney & Counselor at Law

Child support is calculated under the Michigan Child Support Formula which currently includes a 30 page manual and 89 page supplement.  One of the most important factors for calculating child support is income of the parents.  If you are the payer of child support, the higher your income is, the more your child support should be.  If you are the recipient of child support, the higher your income is, the lower your child support should be.  Thus, parents are naturally trying to find ways to have their income listed as low as possible when calculating support.  It is not uncommon for disputes on whether certain business perks should be counted as income to arise.   As a family law and divorce attorney, I am often faced with the following questions:

“Does my per diem count as income for purposes of calculating child support?”

“Does my vehicle allowance count as income for purposes of calculating support?”

“Does my travel reimbursement count as income for purposes of calculating child support?”

“May I deduct my business expenses from my income for purposes of calculating child support?”

In typical lawyer fashion, my answer to these questions is, “It depends.”  Below is a list of inquiries (based on the rules listed in the child support formula manual) that a parent can make to test whether his or receipt of a business perk, per diem, vehicle allowance, etc. should be treated as income.  I have also provided a few examples for practical purposes.

INQUIRY #1:  How much money should be in the parent’s pocket?

The Michigan Child Support Formula states that:

“The objective of determining net income is to establish, as accurately as possible, how much money a parent should have available for support. All relevant aspects of a parent’s financial status are open for consideration when determining support.”*

The child support formula is broader than the tax code.  The key is to determine how much money you could have at your disposal.  The more money that could be available to you (regardless of the source), the higher your income should be for purposes of calculating child support.

For example, you cannot dump all of your pay check into your 401(K) and expect the amounts to be exempt from characterization as income. The money you put in your 401(K) would have otherwise been available in for child support but for the fact you dumped it into your 401(K).  Thus, it should count as income.

INQUIRY #2:  Is the perk related to a “business” use or a “personal” use?

The Michigan Child Support Formula states that:

“Do not consider expenses consistent with a parent’s business or occupation as part of a parent’s income.”**

“Unless otherwise counted, a parent’s income includes the following expenses if they are inconsistent with the nature of the parent’s business or occupation:” … “Travel expense reimbursements, except where such expenses are inherent in the nature of the business or occupation (e.g., a traveling salesperson), and do not exceed the standard rates allowed by the State of Michigan for employee travel.”***

When it comes to determining whether your receipt of a business perk is income, the most important inquiry is whether the perk is related to personal use or business use.  If the business perk is for personal use, it is typically counted as income.  If the perk is for business use, it might not be counted as income.

INQUIRY #3:  Does the perk tend to reduce personal expenses? 

The Michigan Child Support Formula states that:

“Income also includes the market value of perquisites (perks) received as goods, services, or other noncash benefit for which the parent did not pay, if they reduce personal expenses, and have significant value or are received regularly.”****

The key issue here is whether you save money that you would have otherwise had to spend had you not received the business perk.  The rationale is that, if your employer takes care of your personal expense, then you now have more money in your pocket available for child support because you no longer have to spend it on the personal expense.

For example, if your employer pays for your groceries, that payment should be counted as income because you would have had to buy groceries for your normal personal use anyways.  If your employer pays you a vehicle allowance and all you do is drive to and from work, that allowance is income because you would have been driving to and from work anyways.  However, if your employer pays you a vehicle allowance and you are driving to locations to only further the business’s goals, the employer is actually not reducing your personal expenses.  Thus, portions used for business purposes are just reimbursement to you and should not be counted as income.

FINAL NOTES:  Check the facts!

The determination of whether a perk should be counted as income is highly fact driven so it is important to have all documentation that can prove whether a perk is furthering the business goals or whether it is furthering your personal goals.  Sometimes all of a business perk should be counted as income.  Sometimes none of the perk should be counted as income.  Sometimes a portion should be counted as income, and the other portion should not be counted as income.

For example, a traditional version of per diem should not treated as income because per diem is really just reimbursement to you for money you spent on furthering your employer’s goals.  However, just because your pay stub says “per diem” does not automatically mean amounts received are not income.  You should be prepared to show whether the amount of per diem exceeded or fell below the amount of your expenses.  The key is YOU NEED TO LOOK AT ALL THE FACTS when deciding if a perk should be counted as income.

END.

* 2013 MCSF 2.01(B)

** 2013 MCSF 2.01(E)

***2013 MCSF 2.01(E)(5)

**** 2014 MCSF 2.01(D)

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Please note that this article is intended to be academic in nature.  Its purpose is to serve as a memorialization of research as well as invoke community discussion.  This article shall not constitute legal advice.  It does not create an attorney-client relationship.  Legal advice should be given on a case-by-case basis, as its accuracy is relative to the timing and particular facts of the given matter.  It is important to always consult an attorney regarding legal matters. ******************************************************************************

I am Dennis M. Germain, a family law attorney who promotes fair resolutions to domestic relations matters.  I primarily practice in Wayne County, Macomb County, and Oakland County, Michigan.  My office is in Shelby Township, Michigan.  My office and contact information is listed as follows:

www.bestinterestlaw.com

Best Interest Law
48639 Hayes Road, Suite A
Shelby Township, MI 48315

Ph: (586) 219-6454
Fax: (586) 439-0404
Email: Dennis.Germain@BestInterestLaw.com