When you own a business, figuring out your income for child support can feel more complicated than checking a regular paycheck. Your business may provide income beyond a traditional salary, while necessary expenses can reduce what you actually earn.
Here are the main factors that can affect the calculation.
Self-employment income
Income you receive from your business can factor into the amount used to calculate child support. Texas considers money earned through self-employment when determining your net resources. The court looks at the income available to you rather than treating the company’s total sales as your personal earnings.
Ordinary and necessary business expenses
Legitimate costs involved in producing your business income can affect the amount used for support. Texas law allows certain ordinary and necessary expenses to reduce self-employment income for this purpose. For example, the court may consider costs that your business must pay to operate and generate revenue.
Depreciation and other business deductions
Not every deduction on your tax return will reduce the income used for child support. A court can exclude depreciation, tax credits or other claimed expenses if they do not accurately reflect the money you have available.
Other income and resources
Money you receive outside your business may also count toward your resources. Texas law can include sources such as:
- Money earned from investments or royalties
- Income from rental property
- Retirement or pension payments
- Trust distributions, annuities or capital gains
These can matter when your income comes from several places instead of the business alone.
Financial information used in the calculation
The court can require records that show your net resources and ability to pay support. Texas law requires parties to provide information such as tax returns from the previous two years, a financial statement and current pay stubs. If you own a business, these can help show what you actually receive after relevant expenses.
Review the numbers before support gets calculated
Owning a business can make your child support calculation more involved than simply checking your reported salary. Reviewing your business records, expenses and other income with an attorney can help you determine which ones may affect what you owe and address concerns as early as possible.