Are dividends and investment income included in child support income calculations?

Yes, both dividends and investment income are included in the income calculation under the Child Support Guidelines. The Guidelines define income broadly to include all income reported on the federal tax return, and dividends paid to a shareholder — including dividends from a private corporation that the payor controls — are included in that figure.

For dividends from publicly traded companies, the calculation uses the actual dividend received (not the grossed-up amount that appears on the tax return, which is a tax calculation artifact). For dividends from a private corporation, there is additional scrutiny: courts can look at whether the payor is choosing to pay themselves dividends at a rate that minimizes their tax and support obligation, and whether retained earnings in the corporation should also be considered as available income.

Investment income from sources such as rental properties, interest, and capital gains is generally included as well. Capital gains are typically included at 100 percent rather than the 50 percent inclusion rate used for tax purposes, since the full gain represents economic value available to the payor. Passive investment income can be substantial for high-net-worth payors, and the Guidelines are designed to capture this when calculating support. If the other parent has significant investment income that does not appear clearly on a tax return, a lawyer and possibly a forensic accountant can help trace and include it.