Colorado law seeks to protect children after their parents separate and ensure parents share costs in an equitable way.
Colorado determines child support based on a formula that takes into account many factors, including: the gross monthly income of the parties; maintenance paid by either party; child support for other children paid by either party; each parent’s total overnights per year with the child; and other deductions, such as the children’s cost of health insurance premiums and work related child care.
For high income earners, the calculation can become very complex. The Colorado child support guidelines stop at a combined gross monthly income of $30,000 per month for both parents. If the combined monthly gross income of the parents is greater than $30,000, the amount of child support is subject to the judge’s discretion – though the amount cannot be less than it would have been at $30,000 per month. This requires an analysis of the financial resources of both parents, the children’s needs, and the standard of living the children would have enjoyed if the family remained intact.
When a parent owns a business, an income valuation by a CPA is usually necessary because the definition of “income” for purposes of calculating child support in Colorado is not the same as for the Internal Revenue Service. For example, business expenses that reduce a parent’s personal expenses, like food and transportation, will likely be added into the parent’s income when calculating child support. Note that if a parent does not have any managerial duties, is a passive investor, and has a minority interest in a company, the income the company generates for the individual may be limited to whatever actual cash distributions are received. (Note that child support is not tax deductible.)
As you might imagine, this process can lead to legal and strategic challenges. Our team at Halligan LLC has the knowledge to guide you intelligently through this process.