How is Child Support Calculated for Self-Employed Parents in Texas?

What Factors Influence How Much I Can be Ordered to Pay in Child Support?

Texas calculates child support differently from other states, following the overriding principle of standard visitation and standard support. Although the standard is stated not as a mandatory rule, but instead as a guideline that can be altered for good cause, nevertheless the judges seldom stray from the standard. The child support formula depends on the number of children a couple has together, as well as any children that the person is obligated to support, and the “monthly net resources” of the parent that pays child support. However, “monthly net resources” is not the same thing as take-home pay. The state caps the net resources for high income earners, adjusts the resources for health insurance paid for the child, and further adjusts the percentage guideline figure every six years to account for inflation. Child support guidelines also have a different, lower, set of percentages for low income parents.

When determining the proper amount of child support, the court will rely heavily on income tax returns, for the individual parent that will be paying support (the “obligor”), as well as for that parent’s business if they are self-employed. The guidelines do not take into consideration the income of the parent receiving child support, although they do consider whether the standard support to be paid is sufficient to meet the child’s needs given the total circumstances. In other words, if the person receiving child support is well off, that will not lessen the child support obligation, but if the person receiving support is impoverished to the point that it affects the children, then the person paying support may be ordered to pay more if there is a large disparity of income. It all depends on what is best for the children, not on what is an equal burden on the parents.

Once the order is entered, the child support does not automatically fluctuate with changes in income. The annual income will be divided into a monthly average even though the monthly income may vary significantly from month to month. This sometimes creates a problem if there is a significant year-end bonus or dividend because it raises the child support obligation throughout the entire year. Although the standard support is stated in the guidelines as a percentage of net income, the court order will be a set dollar amount based on that percentage, and the dollar amount does not change from month to month.

The laws and procedures could sound complex if you’re a self-employed parent responsible for paying child support, particularly if your income fluctuates greatly and frequently. Skilled lawyers from a San Antonio family law law firm can help you understand how the process works, which takes into account the following:

Your gross income from all sources, minus
Income tax and self-employment taxes, and minus
Health Insurance premiums you pay for your children, and a few other specific things such as Union Dues.

The resulting figure is your available net resources. It is multiplied by a given percentage, depending on the number of children who will receive support. For most people, the rate to be multiplied by the net resources is calculated as:

20% for one child,
25% for two children,
30% for three children,
with a cap of 40% of net income on child support payments.

These rates are reduced, however, if the obligor is already legally obligated to support other children from another relationship. For example, if there is one child before the court, and one other child that the obligor is already supporting, the rate for the child before the court drops from 20% to 17.5%. In such cases the resulting aggregate of all support for all children that the obligor supports may be more than 50% of the obligor’s income, but the State will not garnish or withhold more than 50% of a person’s pay. The total obligation does not disappear, though. The unpaid portion remains a debt to be paid at a later time.

LOW-INCOME CHILD SUPPORT GUIDELINES IN TEXAS

There is an alternate plan for very low income obligors. If the obligor’s monthly net resources are less than $1,000 per month, the court will apply the following rates instead:

One child = 15% of Obligor’s Net Resources

Two children = 20% of Obligor’s Net Resources

Three children = 25% of Obligor’s Net Resources

Four children = 30% of Obligor’s Net Resources

Five children = 35% of Obligor’s Net Resources

And 6+ children = Not less than the amount for 5 children

What Additional Factors Affect Child Support?

Texas Family Code Section 154.123 stipulates additional factors that courts and attorney for child support cases in San Antonio consider in determining child support payments. All decisions must be made in the best interests of the child. However, the factor may or may not sway the court from the regular legal guidelines:

The age and needs of the child
The earning potential or net resources of the recipient parent
Whether alimony payments are being made
Educational and childcare expenses
Extraordinary expenses for the child
The traveling expenses the paying parent incurs during visitation
The ability of both parents to pay
Any existing court orders or agreements
Other factors the court believes are in the best interests of the child

Although child support normally ends when the child reaches the age of 18 years and has graduated from high school (whichever occurs last), if the child is unable to support themselves due to physical or mental disabilities, in some cases the parent may be ordered to continue child support for as long as the child lives. In other cases, if the obligor has fallen behind in payments, they will be required to keep paying after the child support would have normally ended until the shortfall is paid in full.

Consider retaining experienced San Antonio child support attorneys in your child support determination case. They can provide legal counsel and representation to protect you from unfair or inflated calculations of the payments.

What is Considered Income for Self-Employed Parents?

Under the Texas Family Code, a self-employed parent’s source of income may include the following:

Self-employment income, whether in the form of salary, fringe benefits, or owner draws
Commissions
Bonuses
Interest, dividends, and royalty income
Net rental income after deducting operating expenses and mortgage payments
All other income received, such as gifts, trust income, capital gains, retirement benefits, spousal maintenance, and alimony, as reported on the tax form.

In determining the source of income for child support, the following are excluded from the paying parent’s income:

Accounts receivable
Foster care payments
Benefits from temporary assistance
Capital or principal return

Once all the sources of income have been identified, the next step is to calculate the applicable child support payments. Experienced San Antonio child support lawyers can evaluate your financial resources and exempt those not accounted for in calculating child support payments. They can also answer all your questions and help you deal with any fears you have concerning the process.

Deductibles from Net Income

The next step in calculating child support payments is deducting qualified items from the gross income, which in most cases are general business expenses, educational expenses, and taxes. It’s crucial to recognize the difference between employment and self-employment income and deductions and how they impact child support calculations.

Self-employment taxes and deductions play a critical role in child support payments. The taxes include social security taxes, income taxes, and Medicare taxes. The total tax rate is approximately 15% on about 92% of net self-employment earnings. The taxes are a crucial factor as they can significantly affect the net income applicable in the calculations.

It’s crucial to note that some types of deductibles may have their upper limits. Your San Antonio child support attorneys can explain these limitations and their importance in child support calculations. The aim is to ensure the payments you’re subjected to are fair based on your financial situation.

What Factors May Allow for a Deviation from the Child Support Calculation Guideline?

Courts presume that the child support guidelines are in the child’s best interest. However, they can sometimes deviate from the guidelines based on additional factors that justify increasing or decreasing the amounts provided in the statutes. Given the specific circumstances, a court must establish that the approach is unjust or inappropriate in a particular case.

For example, a court may find that an obligor is voluntarily unemployed or under-employed, which is a factor that could affect the child support amount. The court can set the child support based upon the reasonable salary the obligor should be able to make given his or her education and skills. In the case of someone who is self-employed, an audit may be conducted of the company records to determine whether the owner’s salary is reasonable given the financial state of the business or whether the business is unreasonably withholding dividends.

It could also be that the child requires more than the stipulated child support amount due to education, developmental, or physical issues. In high income families, the court may determine that more child support is needed to keep the children supported in the lifestyle to which they have been accustomed. A parent may be ordered to continue paying private school tuition and costs for club sports if that is what the children have experienced prior to the divorce. Deviating from the guidelines is case-specific and must be discussed with skilled lawyers.

Can I Have the Child Support Payments Reduced?

After the child support order is entered, if you have material changes in your business or lifestyle that are beyond your control and significantly affect your income, you can ask your child support lawyers to help you file a child support modification petition. In most cases, the request for a new monthly payment should only be filed if the new obligation would be at least $100 per month different from the current obligation, but that can vary. You must have evidence to adequately demonstrate to the court that your self-employment income has changed since the original child support order due to circumstances beyond your control and is not likely to substantially increase in the near future. Remember that a simple agreement with your former spouse to lower support will not by itself reduce your obligation. You must have a new court order to lower the monthly obligation. Otherwise, despite the agreement, the unpaid portion will be considered an arrearage still owed and will accumulate interest owed as well.

If you recently became self-employed, there’s a high likelihood that your income has significantly changed. If that’s true, the court may be willing to lower your child support based on your lower gross income as long as the court is satisfied that you did not decide to become self-employed simply to avoid paying child support.

An Experienced Family Law Attorney Protecting Your Rights in Child Support Determination

Child support determination is one of the crucial considerations in divorce cases. Arriving at the amount the obligor should pay is a process that accounts for many factors. The elements around the final figure may differ when the obligor is self-employed. Consult San Antonio child support attorneys for legal guidance on how the process works.

Laura D. Heard is a family and estate planning law firm with knowledgeable lawyers who can support you through your divorce journey. We can look into your case and discuss the crucial factors affecting the child support case and how to prepare adequately. Contact us at (210) 775-0353 to schedule a consultation.