- One of the decisions that states must make is whether to use gross or net income.
- Currently, 29 states use gross and 21 states use net (list).
- Advantages of gross income include:
1. Avoids verifying tax filing status through paystubs and/or paystubs
2. Avoids gross-to-net income converter used in conjunction with automated guidelines calculator and the need to annually converter.
3. Avoids extra step in the calculation of support.
4. Treats parents with identical gross incomes similarly regardless whether their net incomes differ due to circumstances unrelated to the children for whom support is being determined.
- Advantages of net income include:
1. Net income is actual income a parent has available which accounts for tax rate differences and child-related tax benefits such as head-of-household status, child and earned income tax credits.
2. More consistent with differential tax tax treatment between child and spousal support.
3. More consistent with child-rearing expenditure measurements
4. More consistent with uncertainty of federal tax rates
- While gross income is easier, net income is fairer.