Opinion
No. 2-639 / 02-0419
Filed January 29, 2003
Appeal from the Iowa District Court for Dubuque County, Lawrence H. Fautsch, Judge.
Mother appeals a reduction in father's child support obligation. AFFIRMED.
Darin Harmon and Cory Thein of Kintzinger Law Firm, P.L.C., Dubuque, for appellant.
James Trannel of Hughes Trannel, P.C., Dubuque, for appellee.
Considered by Hecht, P.J., and Vaitheswaran and Eisenhauer, JJ.
A mother appeals a reduction in the father's child support obligation. We affirm.
I. Background Facts and Proceedings
Roger and Bertha Welbes have one minor child. When the parties divorced, the court required Roger to pay Bertha child support of $560 per month. Roger remarried a woman with five children. His new wife had a child support obligation for all five.
Roger and his new wife filed a joint tax return for the year 2000, claiming dependency exemptions for six children. The exemptions allowed them to reduce their adjusted gross income by $2,800 per child. In the end, they owed nothing and became entitled to a tax refund of $6,069.
In 2001, Roger applied to modify his child support obligation, asserting a substantial and material change in the parties' respective incomes. Bertha responded that the decrease in Roger's net monthly income was more than offset by the income tax refund he and his new wife received. The district court rejected Bertha's argument, and reduced Roger's child support obligation from $560 to $469.28 per month. This appeal followed.
II. Scope of Review
As a preliminary matter, we must determine the appropriate scope of review. Roger contends that, as the facts are essentially undisputed, our review is on error. See State ex rel. Shoars v. Kelleher, 539 N.W.2d 189, 190 (Iowa 1995). Although Roger's contention is appealing, we are not persuaded that our role here is limited to an interpretation of the child support guidelines, as was the case in Kelleher. Instead, we are being asked to determine whether, on the whole record, a modification of Roger's child support obligation was equitable. Accordingly, our review is de novo. See In re Marriage of Belger, 654 N.W.2d 902, (Iowa 2002); In re Marriage of Hilmo, 623 N.W.2d 809, 811 (Iowa 2001) (employing de novo standard of review in deciding whether parent was entitled to a credit for social security dependent benefits received by child).
III. Modification of Child Support Order
A party seeking to modify a dissolution decree must establish by a preponderance of the evidence that there has been a substantial change in the circumstances of the parties since the entry of the decree. In re Marriage of Maher, 596 N.W.2d 561, 564-65 (Iowa 1999). In the child support context, a substantial change exists "when the court order for child support varies by ten percent or more from the amount which would be due pursuant to the most current child support guidelines. . . ." Iowa Code § 598.21(9) (2001).
In determining child support, the court looks first to the child support guidelines. Hilmo, 623 N.W.2d at 811. Under the guidelines, a court is to calculate each parent's "net monthly income", defined as gross monthly income less certain allowable deductions. Iowa Ct. R. 9.13; Hilmo, 623 N.W.2d at 811. Allowable deductions include federal income tax payments. Iowa Ct. R. 9.5(1). Dependency exemptions affect the amount of tax owed and, consequently, the amount of this allowable deduction and the ultimate net monthly income figure. See In re Marriage of Thede, 568 N.W.2d 59, 62 (Iowa Ct.App. 1997). Cf. Kalkowski v. Kalkowski, 607 N.W.2d 517, 527-28 (Neb. 2000) (noting dependency exemption worked to reduce federal tax liability, thereby increasing net income subject to support obligation).
In the modification proceeding, Roger reported his income as $35,142. He claimed a personal exemption and one dependency exemption. His net annual income after consideration of all applicable deductions was $27,204.76, resulting in net monthly income of $2,267.06, down from $2,416.79 at the time of the decree. The amount of child support due under the guidelines based on this new net monthly income figure was $469.28. As the disparity between the decreed amount and the newly calculated amount was more than ten percent, the district court acted equitably in modifying Roger's support obligation.
As for the tax refund received by Roger and his new wife, we can discern no basis under the guidelines for offsetting the refund against Roger's reduced earnings. Roger did not list the income of his new wife on the guideline worksheet. This is consistent with the guidelines, which make no provision for a stepparent's income. See In re Marriage of Linberg, 462 N.W.2d 698, 701 (Iowa Ct.App. 1990). As for the dependency exemptions, he claimed only one for his own child. This is consistent with federal law defining a dependent. See 26 U.S.C. § 152 (2001).
The five additional dependency exemptions listed on Roger's joint income tax return belonged to his new wife. In the absence of evidence her children lived with or were supported by Roger, he was not obligated to include them on the guidelines worksheet. Cf. Rouland v. Thorson, 542 N.W.2d 681, 685 (Minn.Ct.App. 1996) (affirming inclusion of dependency exemptions for new wife and her children in calculating support obligation of a father where stepchildren were living with him and he had historically claimed exemptions for them on his W-4 form). We conclude the court acted equitably in declining to offset Roger's joint income tax refund against his reduced earnings.