The child support guidelines (DCF 150.03(1)) require that child support must be determined based on one or both parents’ gross income. “Gross income” is defined at DCF 150.02(13); that subsection provides a detailed list of what is included in gross income (such as investment income and veteran’s benefits), and what is not included (such as child support and public assistance).

While this may appear to be a straightforward calculation, in practice most cases involve complicating factors. Some of those are discussed below.

Overtime Income

If a parent regularly receives overtime pay, some courts include the average amount of overtime in the parent’s gross income for determination of child support. There is no consistency between courts on this issue; some include overtime pay, and some do not.

Earning Capacity

The guidelines allow the court to base child support on a parent’s earning capacity, rather than on the parent’s actual income. To determine a parent’s earning capacity, the court can consider the factors listed at DCF 150.02(14), such as education, training, work experience, previous income, and child care duties. This determination is very fact-specific and thus varies greatly. For example, if the court determines that a parent voluntarily and unreasonably reduced income, the court will base child support on that parent’s earning capacity.

Social Security

The Social Security Administration can provide three types of Social Security: (1) “Old-age” insurance benefits under 42 U.S.C. 402 - 503; (2) Social Security Disability, which is based on payments to Social Security through employment; and (3) Social Security Disability Insurance (SSDI), which provides a minimum disability payment even if a recipient has not contributed enough to be eligible for Social Security Disability. The Child Support Guidelines include as income Social Security Disability and old-age benefits for determination of child support.

When a parent receives Social Security Disability or old-age benefits, a minor child is also entitled to benefits. Under the child support guidelines, DCF 150.03(5), the court may add the child’s Social Security benefit to the child support payer’s income to determine child support. Once a child support amount is determined, that amount is reduced by the child’s Social Security benefit. If the child’s Social Security benefit is more than the amount the payer would be required to pay under the guidelines, no child support would be paid.

Contributions to Retirement

The guidelines provide that any tax-deferred, voluntary contribution to a retirement plan is included as gross income. The guidelines do not, however address whether mandatory contributions are included in gross income. The State of Wisconsin recently began requiring its employees to contribute part of their income to their retirement plan. As far as we can determine, this amount should be excluded from gross income for child support purposes.


Determining the gross income of a self-employed parent can be very complicated. To some degree, the “net profit” shown on the self-employed parent’s income tax return is comparable to the gross income of an employee who gets a W-2 at the end of each year. However, the child support guidelines state that the Internal Revenue Service rules establishing which expenses are deductible for determination of net profit by a self-employed person are not controlling for purposes of establishing child support. This distinction, among other issues, can cause major complications in the determination of gross income for child support purposes for a self-employed parent.

Depreciation deductions for equipment purchases and for rental properties provide examples. The Federal Tax Code allows people who are self-employed to deduct the cost of equipment purchases; under some circumstances, most or all of the cost of the equipment can be deducted in one year. For people who invest in rental properties, federal tax law requires that depreciation deductions be taken for 27 ½ years.

For child support, however, the court has discretion whether to deduct those depreciation amounts from a person’s income before determining the amount of child support. It is important to understand the reason for depreciation to help the court understand why it should or should not allow the deduction.

For example, someone in the logging industry may buy expensive equipment that will be used hard; after five years it will have no value and need to be replaced. The cost of that equipment truly is a cost of doing business; with a proper presentation to the court, the court will deduct the cost of that equipment from the person’s income prior to determining child support.

Rental property presents a more difficult decision for the court. The IRS allows rental property repair deductions annually; generally, the court determining child support will also allow these deductions. The IRS requires full depreciation over the course of 27 ½ years; this annual deduction, however, may not make sense in the context of child support. It is extremely unlikely that the value of a rental property will drop to zero in 27 ½ years. In fact, prior to the recession of 2007, real estate in Madison appreciated at an average rate of 7 percent annually. Real estate in the Madison area has recovered from the recession and is appreciating again. Thus it would be hard to argue to the court that the mandatory depreciation taken on taxes should be deducted from a person’s income when child support is determined.

Allowable tax deductions for meals and travel expenses are other expenses that may be debatable in the child support context. For example, the court may be reluctant to allow a deduction for the full cost of meals because, of course, both self-employed and employer-employed workers have to eat.

Real Estate Investments

People who invest in real estate and rental property can present particularly difficult issues for determination of income available for child support. Purchasing rental real estate is a long-term investment. Often the investor puts down a substantial amount. If all goes well, the cash flow from rentals will pay the ongoing costs (with the exception of reimbursing the investor for the initial down payment). Over a period of years, rents can be increased, and payments on mortgages will reduce the liability against the property, creating equity in the property and a better cash flow.

Pursuant to the Child Support Guidelines, the court has discretion to determine income by deducting from the business’ gross income the reasonable expenses necessary for the growth of the business.  See DCF 150.02(16).  Generally the court allows deductions for maintenance, mortgage interest, property taxes, and advertising. Courts may not allow depreciation deductions. 

Federal tax law requires people who invest in rental property to take a depreciation deduction against the property on their income tax over a period of 27.5 years. The court may use its discretion to determine that the depreciation deduction is not reasonably necessary for the growth of the business. When reviewing the real estate investor’s tax return, the court may add back to the net profit from the real estate the amount deducted for depreciation. The court does so because at least in the Madison area, if property is properly cared for, the value of property increases. Thus there really is no depreciable loss from owning property in central Wisconsin. 

The Federal Tax Code also recognizes this fact and recaptures any tax benefit to real estate investors when they sell the property, using a concept of depreciation recapture.

A real estate investment that appreciates in value creates a retirement asset similar to a retirement account. Unlike a retirement account, however, the increase in the value of real estate is only seen when the property is sold. Ascertaining and collecting a reasonable amount of child support can be problematic when the child support payer invests in real estate when the child is young and does not sell the property until after the child is 18. 


Determination of income for child support purposes can be extremely complicated, and can make a significant difference in the amount of child support ordered. During your free consultation, the attorneys at Wessel, Lehker & Fumelle can help you understand your options and likely outcomes. Attorney Keith Wessel’s experience as an owner of a small business as well as rental properties helps inform his understanding and analysis of these complex topics.