How is Child Support Calculated?
If you have minor children and foresee a divorce in your future then it’s important to have a handle on the basics of child support in Texas, so here is a primer of sorts –
First, support is almost always based on the income of the paying parent not the receiving parent even though the receiving parent may make more, sometimes a lot more, than the paying parent. While the Court can consider the ability of both parents to support the children as well as the available financial resources most judges will, most of the time, follow the child support Guidelines as they are applied to the support paying parent.
And just what are those Guidelines, you ask? Basically, they’re what the Texas Family Code says a court should use in setting child support. In reality, the Guidelines accomplish two things: first, they define what counts as income that a court may take child support from (the income available for child support is called “net resources”) and, secondly, they tell a court how much to take out for child support.
First, in computing the amount of net resources the Guidelines say that a court has to begin with all of a parent’s income. However, income is not only what a person makes at his or her job but also includes commissions, overtime pay, tips and bonuses as well as unearned income such as interest, dividends and royalties. Also included is self-employment income, net rental income and all other income actually being received which means that things you might not ordinarily think of as income will go towards what’s available to pay child support and we’re talking here about severance pay, retirement benefits, trust income, annuity income, capital gains, social security benefits other than SSI, unemployment benefits and worker’s compensation benefits. This even includes gifts and prizes as well as spousal maintenance or alimony being received!
Next, once a parent’s total income has been figured up the Guidelines tell a court what to subtract to get to that parent’s net resources. About all that gets subtracted out are federal income taxes and payroll taxes (and that’s for a single person who uses the standard deduction and claims one exemption) and the cost of health insurance to that parent for the children.
Then, once a court has figured the net resources for the child support paying parent, the last step is to set the actual amount of child support which is done via use of a percentage – 20% for 1 child, 25% for 2, 30% for 3, 35% for 4 and 40% for 5 or more.
Here’s how that operates in the real world – let’s say you are getting divorced and will be paying child support. You have 2 children. You make $60,000.00 a year as an employee and also receive $6,000.00 a year in interest and royalty income. Your income is, therefore, $66,000.00 annually or $5,500.00 a month (everything is done in months, by the way). Per the Guidelines, your federal income tax and payroll tax hit will be about $1,165.00 a month, leaving you with net resources of $4,335.00 monthly. Let’s also say that you’re going to keep the children on your group health plan at work and it will cost you $200.00 a month.
Hence, you have income available to pay child support of $4,135.00 a month. For 2 children you’ll pay 25% as child support so you can be pretty sure your monthly support will be set right at $1,034.00 a month. And, no, that’s not tax deductible to you.
Now, you must understand that there are subtleties to this system. It applies to most parents but it is possible for some to get so-called “above Guidelines” child support, for example, and figuring out exactly how much income self-employed parents make and what they should pay in support can be tricky. There are also adjustments to be made for child support paying parents who have “other” children (who are not before the court) for whom they owe a duty of support.
We’ll talk more about some of those subtleties in other blogs. For now, suffice it to say the good news is that for most of you parents there’s a fair amount of predictability in how much child support you are likely to pay or receive. That makes budgeting easier to do for both the support paying and the support receiving parent but the bad news, if it is bad news, is that there’s not much flexibility in the system. For maximum flexibility, parents should focus on making agreements that meet their joint needs, not going to court.
Lewis, Passons & Darnell, P.C.