Child support in Washington runs on income, and for most parents income is easy: look at the paystub. A business owner is different. The owner decides what the business pays them, what stays in the company, and what the company pays for. So Washington law refuses to take the owner’s W-2 at face value, and the real analysis happens in the business records.
The short version: gross income includes income from any source under RCW 26.19.071, including self-employment and closely held business income. For a sole owner, retained earnings count absent a legitimate business need to keep them in the company. Personal expenses the business pays count as income. Questioned deductions must be justified by the parent claiming them.
Here’s how courts determine a business owner’s income, whether you’re the owner or the other parent.
The starting point: income from any source
Under RCW 26.19.071, gross monthly income includes income from any source except a short list of exclusions. The statute names “income from self-employment, rent, royalties, contracts, proprietorship of a business, or joint ownership of a partnership or closely held corporation” specifically, along with salaries, bonuses, dividends, interest, and more. Two years of tax returns and current paystubs are the required verification, and income that doesn’t appear on either must be verified some other way.
The statute also draws one line that matters in remarriage situations: the income of a new spouse is disclosed but not counted in the basic support calculation.
Retained earnings count for a sole owner
The foundational rule comes from In re Marriage of Stenshoel, 72 Wn. App. 800, 866 P.2d 635 (1993): a business’s retained earnings should be treated as income to the business’s sole owner unless there’s a legitimate business need to retain them. The same case allows courts to measure a sole proprietor’s income by the draws actually taken.
The logic is hard to argue with. A sole owner who leaves profit in the company still controls that profit. If the salary line could cap support, every owner would have a small salary. Note the rule’s own limits, though: it speaks to a sole owner, and it yields to genuine business needs. A company that retains earnings to replace equipment, satisfy loan covenants, or fund a documented expansion has a real answer. “We always keep money in the business” without documentation is not one. And the scrutiny is not optional. When an owner takes income from a company he manages and puts it back, the court must carefully scrutinize that decision. Washington’s Court of Appeals said so directly. In re Marriage of Palomarez, 15 Wn. App. 2d 187, 475 P.3d 512 (2020).
Personal expenses through the business are income
Palomarez settled a second point that used to be argued case by case. Personal expenses paid by a privately held business must be attributed as income to the working spouse. The vehicle, the phone plan, the travel that’s really vacation, and the family cell phones belong in the income calculation. So do the relatives on payroll who don’t work real hours. (That case involved maintenance; the same income logic drives support.)
Discovery in these cases follows the money accordingly. The Family Law Deskbook’s own checklist for business owner cases tells lawyers to look for owners “taking less pay and taking loans instead, charging personal expenses to corporate accounts,” and making “unnecessary or excessive retained earnings,” It also flags phony employees on the payroll and altered tax returns. Returns can be checked against IRS transcripts obtained with Form 4506-T. In our experience the general ledger and the owner’s loan applications, where people tend to describe their income generously, settle more of these disputes than the tax returns do.
The tax return is evidence, not the verdict
Deductions that work for the IRS may not work for support. Whether an expense is deductible under the federal tax code does not control whether it’s deductible in the child support calculation. In re Marriage of Mull, 61 Wn. App. 715, 812 P.2d 125 (1991). The statute allows self-employed parents to deduct normal business expenses and self-employment taxes. Its own text adds the burden: “Justification shall be required for any business expense deduction about which there is disagreement.” Depreciation, for example, counts only to the extent it reflects money actually going out to replace equipment.
And the return itself can be set aside. Courts have rejected tax returns as an accurate measure of income where the deductions taken weren’t legitimate. The reviewing court declined to limit that to cases of outright error. In re Marriage of Mansour, 126 Wn. App. 1, 106 P.3d 768 (2004). When a self-employed parent fails to produce verified expense information, the court may estimate income by any reasonable method. One approved approach averaged the tax return income with the personal spending visible in the business accounts. In re Marriage of Gainey, 89 Wn. App. 269, 948 P.2d 865 (1997). Where concealment makes true income impossible to determine, the court can impute income outright.
All of these rules point the same way. The parent who controls the records loses the benefit of the doubt by withholding them. Washington courts resolve uncertainty about values against the party who has the records and doesn’t produce them.
Variable income gets averaged, not ignored
Business income swings. Washington handles that through inclusion plus deviation rather than exclusion. Bonuses and other nonrecurring income go into gross income. The court may then deviate from the standard calculation after reviewing the nonrecurring income received in the previous two calendar years. For a contractor whose profit doubles in a good year, the dispute is usually about what’s recurring, and the answer comes from a multi-year picture rather than the latest season. The valuation profession’s guidance points the same direction: examine an owner’s compensation over roughly five years, not one.
Newer forms of compensation follow the same include-it logic. Vested and delivered restricted stock units count as income whether or not the parent sells the shares. In re Parenting and Support of E.J.S., 16 Wn. App. 2d 776, 483 P.3d 110 (2021).
If income is disputed, the court must enter findings showing how it determined gross income. A support order for a business owner that doesn’t explain its income finding has an appellate problem. One open issue to flag with counsel. Divisions One and Two of the Court of Appeals disagree on one point. Does contemporaneously ordered spousal maintenance count as income in the support calculation? The split hasn’t been resolved. In an owner case with significant maintenance, that unsettled question can move the support number.
What counsel and CPAs should pull together
For either side, the working file is the same. Start with two years minimum (ideally five) of personal and business returns with all schedules and K-1s. Add the general ledger, payroll records for family members, the depreciation schedule, and loan and credit applications. Finish with the business bank statements that show what the company actually pays for. When replacement compensation is disputed, salary data exists by industry and revenue band. Sources include the Bureau of Labor Statistics, ERI, RMA, and industry surveys. The expert using them should name the source, the comparable duties, and the date of the data.
Also worth knowing: Washington’s child support economic table was extended effective January 1, 2026, and now runs to combined monthly net incomes of $50,000. Owner families used to sit above the old table’s $12,000 top line. Their true income now maps directly onto the schedule. That makes the income determination matter even more than it used to.
Common questions
My company retains earnings every year. Will all of that be income? Not necessarily. Document the business reason: equipment replacement schedules, loan covenants, seasonal working capital. Undocumented retention by a sole owner is what gets added back.
I pay myself through owner draws, not salary. Does that hide anything? No. Draws are a recognized measure of a proprietor’s income, and courts look at what you actually took plus what the company paid on your behalf.
Can the court just ignore my tax return? It can find the return unreliable and use a reasonable alternative method, especially if deductions don’t survive scrutiny or records weren’t produced.
Current as of August 2026. Child support law changes; check with us or current statutes before relying on any figure here.
This post is part of our series on divorce involving a family business. Read the main guide, Divorce Involving a Family Business in Washington, or the double dip problem in business valuation and maintenance.
Law Offices of Daniel Ehrlich, Everett. Family law in Snohomish, Island, King, and Skagit Counties. (425) 954-5578.
This article is general information, not legal advice. Every case is different. If your case involves business income and child support, talk to an attorney.
