Understanding Income Imputation and When Potential Earnings Matter

In family law, fair financial support for children and former spouses is a key priority. But what happens when one party claims little or no income despite having the skills or experience to earn more? In such cases, the court may decide to impute income, meaning it assigns a reasonable income figure to that individual based on what they could be earning, rather than what they actually are.

This principle can significantly influence decisions around child support and spousal support especially when one party is unemployed, underemployed, or earning less by choice.

What Is Income Imputation?

Imputing income means that the court treats a person as if they are earning a certain amount, even if they are not bringing in that income. It is often used when someone is not  working to their full earning capacity and is instead relying on a lower income figure to reduce their financial obligations.

Courts do not impute income arbitrarily. There needs to be evidence that the person is voluntarily unemployed or underemployed, or otherwise not using their earning potential.

When Might the Court Impute Income?

There are a few common situations where imputation of income becomes relevant:

• Voluntary Unemployment or Underemployment: If someone quits their job, takes a lower-paying role, or avoids employment entirely without a valid reason, the court might determine they are deliberately reducing their income to avoid higher support payments.

• Education and Skills Not Being Used: If a person has training, experience, or qualifications that could land them a higher-paying job, but they are not pursuing appropriate employment, the court may assign income based on their potential.

• Lifestyle Doesn’t Match Reported Income: If someone reports low or no income but maintains a lifestyle that suggests otherwise, the court may look closer and decide to impute income accordingly.

  
  

Key Factors the Court Considers

Every family law case is different, and the court takes a balanced approach when deciding whether or not to impute income. Some of the factors that may be weighed include:

• Age and health of the person;

• Education, skills, and job history;

• Availability of suitable employment in the local area;

• Childcare responsibilities or other caregiving duties; and

• Past earning capacity, particularly the last 3 years.

  
  

Why It Matters

The court must also ensure that income imputation is fair and realistic. The process of imputing income helps prevent one party from avoiding their financial responsibilities. It ensures that support payments are based on what someone is capable of earning, not just what they report on paper.

That said, courts are cautious in applying this tool. The decision to impute income must be grounded in evidence and take into account the full context of a person’s life and capabilities.

---

Final Thoughts

If you are involved in a family law case and concerned about how income is being reported, or underreported, it is important to speak with a family lawyer who can help you understand your options. Whether you are the payor or the recipient of support, knowing how income imputation works can help ensure that the outcome is just and appropriate for everyone involved.

BOOK A CONSULTATION