Michigan Child Support: Bonuses and Commissions (Usually) Count as Income

Child support is a potential issue in every Michigan divorce or custody case with minor children involved.   Child support is calculated based on a statutory formula, with the primary variables being the income of each party, the number of children, the number of overnight visits per year for each parent, and lesser items such as monthly health insurance premiums or day care costs.   As one might imagine, people can argue over almost anything, including each of these variables used in the calculation. 

In most cases, the primary variable being disputed is income.  Aside from arguments regarding a party being unemployed or underemployed and the amount of income that should be attributed to them, battles can arise over forms or types of income.  If one or both of the parents in the case are self-employed, that can add another layer of disagreement in determining their income. Even if neither person is self-employed, there can be issues regarding bonus and commission income which one might earn above and beyond their base salary.   Contrary to common belief, bonuses and commissions are income for calculating child support pursuant to the Michigan Child Support Formula. 

The 2017 Michigan Child Support Formula Manual defines income as wages, overtime pay, commissions, bonuses, and/or other monies from all employers or as a result of any employment.   Invariably, almost any bonus or commission receiving earner might say “but my bonuses or commissions are not guaranteed.” You might assume that because these forms of income may not be guaranteed, or may fluctuate, that they are not going to be included in the calculation.  This is not true.   Nowhere is the word “guaranteed” stated.   Once resolved that these proceeds are income, the next step is to assess with your ADAM attorney just how these income items might be dealt with and calculated.

Though most professionals might have a base salary, there are some, such as those in sales, who work solely on commission.   As anyone receiving bonus or commission income knows (as do their spouses), these items generally do fluctuate and are going to be based on performance or sales.  Performance can include personal performance or overall company performance.   Each situation is different.   In situations in which a person has been in the same job for multiple years, there may be a clear record of how these items go up and down over the years.   Presuming a track record exists, it is common for an average of this type of income to be calculated over the last few years.  A three year average is typical.  However, there may be reasons for averaging a longer period of time.  This depends on which side of the coin you are on.  For the earner, the number of years desired to be averaged will depend on the number at the end of that calculation.  If more or less years lowers income, you advocate accordingly.   Of course, the other side will argue for an averaging time period they believe helps them.  Perhaps statute should set forth a specific number of years to look at, but it doesn’t.   Thus, there is no clear rule.

Some exceptions may arise in which averaging makes no sense.   Perhaps someone has only been employed in their first commissioned position for a few months, or a year.   This could mean that they have done the same type of sales for years, but recently changed employers.  In these instances there is nothing to average on a yearly basis, and a court is likely to look at a year-to-date total or go back as far as it can.   Likewise, someone might be newly employed and has received one bonus, with no idea whether another is coming.   Fortunately, courts are open to any reasonable arguments and may be persuaded in certain instances to leave bonus income out of the calculation.  Given the variations for calculating these types of income or assessing whether and how they should be included, it’s important to discuss these matters in detail with your ADAM attorney.

If there are large parts of your income that fluctuate, it may be possible to base your child support numbers on your base income or an agreed upon amount that you think is reasonable.  You could then agree to pay a percentage of any income above this agreed upon number as additional child support. 

The child support formula uses gross income (income before taxes) and detailed information about you to determine your taxes, and then bases child support on a theoretical net income, not necessarily your actual net income.  There are many considerations that go into calculating child support the correct way so using an on line calculator without any discussion with an attorney can be a mistake.

About ADAM (American Divorce Association for Men)

The American Divorce Association for Men (ADAM) is a group of highly qualified attorneys who advocate for men’s rights in divorce, child custody and parenting time, paternity, support, property settlement, post judgment modifications, and other family law matters. Since 1988, ADAM has been aggressive, diligent, and uncompromising when representing their clients. A team of compassionate and skilled family law attorneys, ADAM is dedicated to being Michigan’s leading divorce attorneys for men.