Divorce proceedings in New Jersey require a thorough assessment of each spouse's income, which is a crucial factor in determining child support and alimony. While most people think of income in terms of salary or wages, employer-sponsored fringe benefits can also significantly impact these financial obligations. Understanding how these benefits are treated—and how they should be accounted for in a divorce—can be essential for both spouses.

What Are Fringe Benefits?

Fringe benefits are non-monetary compensation provided by an employer in addition to an employee's salary. These benefits can hold substantial financial value and may need to be considered when calculating income for divorce-related financial obligations.

Common examples of employer-sponsored fringe benefits include:

• Health insurance (medical, dental, and vision coverage)

• Employer contributions to retirement plans

• Company vehicles (especially if used for personal purposes)

• Stock options or restricted stock units (RSUs)

• Expense reimbursements (travel, meals, etc.)

• Housing allowances

• Tuition reimbursement

• Bonuses and profit-sharing plans

• Commissions and deferred compensation

How Fringe Benefits Impact Child Support and Alimony

Child Support

New Jersey child support guidelines require an analysis of each parent's income, including non-traditional forms of compensation. Courts may consider the value of certain fringe benefits as part of a parent's gross income, particularly if they reduce personal living expenses. For example, if an employer provides a company car for personal and business use, the court may assign a monetary value to that benefit and include it in the parent's income for child support calculations.

Alimony

Alimony determinations also consider a spouse's ability to pay, which means fringe benefits may factor into a court's analysis. If a spouse receives significant employer-sponsored benefits that lower their cost of living (such as a housing stipend or comprehensive health coverage), the court might view those benefits as increasing the spouse's available income. This could lead to higher alimony payments than if only base salary were considered.

Grossing Up Fringe Benefits for Tax Purposes

To ensure a fair assessment, fringe benefits should be “grossed up” for tax purposes when calculating income. This process involves adjusting the value of non-cash benefits to reflect what the recipient would have earned if the benefit had been received as taxable income instead.

For example:

• Suppose a spouse receives a $10,000 per year housing allowance from their employer. If that allowance is not subject to income tax, it may be equivalent to a taxable salary of $13,000 (assuming a 25% tax rate).

• Similarly, if a spouse's employer pays $8,000 per year in health insurance premiums, that benefit may need to be added to their income to reflect its true financial value.

By grossing up these benefits, courts ensure that financial obligations are based on an accurate representation of a spouse's economic resources.

Conclusion

Fringe benefits can significantly impact income calculations in a New Jersey divorce, affecting child support and alimony determinations. Courts may consider employer-provided perks as part of a spouse's total income, particularly when they reduce personal expenses or provide substantial financial value. Ensuring that these benefits are properly accounted for—including grossing them up for tax purposes—can lead to fairer outcomes for both parties. If you are facing a divorce and have concerns about how fringe benefits may impact your or your spouses financial obligations, we can help guide you navigate the issues.  Contact your divorce attorneytoday at 856-546-1350 to schedule your confidential consultation.