Understanding Income Imputation and When Potential Earnings Matter

What happens when someone reports very little income but appears capable of earning considerably more? In family law, courts are not always limited to the income shown on a tax return. A court may impute income and calculate support based on what a person could reasonably be earning.

The legal basis

The Federal Child Support Guidelines allow a court to impute income in a number of situations, including where a parent is intentionally under-employed or unemployed, has unreasonably deducted expenses from income, has diverted income, or has failed to provide required financial information. Similar principles are applied when determining income for spousal support.

Relevant circumstances

• Voluntary unemployment or underemployment;
• Education, qualifications, and employment history;
• Available employment opportunities;
• Previous earning capacity;
• Caregiving responsibilities;
• Health considerations; and
• Whether a person's lifestyle appears inconsistent with their reported income.

Not a punishment

The purpose is not to punish someone for earning less. It is to ensure child and spousal support obligations reflect a realistic assessment of earning capacity. Reasonable explanations — such as the needs of a young child, a health condition, or reasonable educational pursuits — are considered.

Try our free Support Calculator for an estimate, and speak with our team if income is in dispute.