Imputing income to a spouse under New Jersey family law means a judge believes a spouse or parent can earn more income or is not reporting their true income from all sources. The judge sets an income for the payor which may be higher than the actual income they report on their taxes.
Imputation of income applies in situations where the court must decide the amount of child and spousal support. Since these amounts are dependent on the income of the payor, the court must determine the payor’s income accurately and fairly. Sometimes that requires imputing income to that spouse.
Common Ways Income May Be Questioned
Unfortunately, in some situations when spouses or parents separate, one spouse may decide to stop working so they do not have to pay child or spousal support.
If this is suspected, a judge will take appropriate action depending on the circumstances of the lack of income or if income is being falsified. Common examples include:
- A parent staying at home to care of children but the children are already going to school and do not need full-time care
- A parent working part-time instead of full-time when they can work full-time
- A parent being underemployed, meaning not having employment that reflects their experience or education
- A parent living in a country where they do not have to, or pay much lower taxes
- People who own businesses and write off their personal expenses as business expenses through their business
- People who do not report income, such as rental income or cash income
Consequences of Imputing Income in New Jersey
Courts have broad discretion to impute income to a spouse, and it commonly occurs in many circumstances. For example, it could be considered intentional under-employment or unemployment, exemption from paying taxes, or applying for residence in a country with lower effective income tax rates.
Additionally, courts may consider imputing income to a spouse if diversion of income would affect the child support payable or failure to provide information about their income. Others could be imputed if:
- Unreasonable utilization of property to generate income
- Unreasonable deduction of expenses from income
- Derivation of income from dividends, capital gains or other sources taxed at a lower rate
- And/or status as a beneficiary under a trust.
The New Jersey courts have made clear that where a parent or spouse is otherwise capable of working, they can still be imputed at least a full-time, minimum-wage income—in addition to any other income they might otherwise earn.
