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There are so many different issues at every level of a person's life to be considered when contemplating divorce or separation. If you have children then one of the most important set of issues will be custody, parenting time and child support. Child support in Michigan is determined by a formula that basically includes each parent's income and the number of overnights that each parent has with the child. This blog is written to broadly address the question of whether bonus income from a parent's employment is included as part of the child support formula in Michigan. If you have questions about your own personal situation, please do not hesitate to contact us to schedule a consultation by clicking on this link or calling us at (248) 608-4123.
Is Bonus Income From My Employer Included When Calculating Child Support in Michigan?
The answer is yes, bonus income is included as part of the child support calculation. Basically all income from any source whatsoever is included when calculating child support. The Michigan Child Support Manual indicates that if a parent has employment that varies annually due to bonuses, seasonal employment or other factors, then the court should use a three-year average to determine that parent's income. Therefore, if you had a spike in income due to a particularly large bonus from two or three years ago, it might be worth waiting to file for divorce as this may have a negative impact on calculations for child support and alimony. Alternatively you would have to argue and then prove that this was a complete aberration and there is virtually no chance that you will ever get another similar bonus in the future.
Another approach that attorneys will sometimes take to this issue, when handling it in mediation or negotiation, is to have a two-tiered child support where there is one, basic child support paid throughout the year and two a potential lump sum payment at the end of the year to account for bonuses or other additional income earned over the year that was not included when calculating the base monthly child support . This can also be a helpful way of handling the situation where a parent is starting a new job where bonuses may be earned but there is not a three-year track record of bonuses available to calculate the three-year average..
This is probably most easily understood by using an example. So let's say that parent A earns a base income of $100,000 annually and is entitled to bonus or other additional income. The monthly child support is calculated based upon parent A earning $100,000. Then once the monthly support is determined, we take that number and determine what percent of parent A's monthly income is attributable to child support, suppose for parent A that percent is 10%. At the end of the year, parent A's W2 indicates that parent A earned $125,000, so he earned $25,000 that was not included in the base child support. Applying 10% to $25,000 results in parent A owing a lump sum payment of $2,500 to the other parent for this bonus income.
If you have any questions regarding divorce, legal separation or are considering marriage and are interested in a prenuptial agreement, please contact us to schedule a consultation by clicking on this link or calling (248) 608-4123.
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