Rental Income Calculations for Support

mini house sitting on coins

For some time now California Family Courts struggled with what to do with the rental income when calculating spousal support. Unlike child support, there is no magic formula to determine the amount of spousal support payments. Instead, trial courts must weigh all the factors provided under Family Code 4320. But what about rental income? For example, if one spousal has a property for which they are receiving rental income and paying the principal loan payments, is the rental income received factored as “income” that is available for support? Well, now the California Court of Appeal has reached a decision on this long litigated issue. As a matter of first impression, the Court in Marriage of Deluca,  (2020) 45 Cal. App. 5th 184 held that the trial court has discretion to remove principal payments on the loan of the rental property when calculating support. In short, it is up to the trial court to decide whether they will deduct the monies a spouse pays towards the rental property’s principal loan as money that is available for support. In doing so, the trial court must look for 1. substantial evidence, 2. that is reasonable and legitimate 3. consider the totality of the circumstances and 4. determine whether including the money paid as money available for income would be a substantial hardship for the supporting party. Id. at 199. In its basic form, the Court held that when a party is paying for the principle loan payment in a rental property, they may have less money available to pay for spousal support. Likely perceiving the loopholes this decision may cause, the Deluca Court included that similarly, trial court has discretion to disallow any deduction on principal payments for income available for support if such payments were 1. unnecessary, 2. acquired for the purpose of lowering spousal support, and 3. excessive. Id. at 199. Alas, attorneys, Judges, and accountants in California have a direction on what to do with rental properties and income when calculating spousal support. For a more in depth discussion on this topic, please visit the Exhibit A podcast playlist here: EXHIBIT A PLAYLIST