Child support and rental income

General Real Estate Investing
9yFollow

Child support and rental income

Hiro Kitagawa
Rental Property Investor · Plano, TX · Member since 2017 · 47 posts · 6 votes

I'm not sure how suited this question is for BP, but I'd like to mention if anyone knows.

I currently pay child support bi-weekly.  Recently (April '17) I began leasing the first rental property for $1,600/mo, and the mother of the child stated that this would be an increase in income and therefore the support amount should increase.

With that said, which would be considered an increase in income - gross or net?

Gross income would be $1,600/mo while net would be approx. $200/mo.  If the child support court bases the calculation of off "gross" rental income....it would be seen as almost $20K raise in income, which in reality that is not the case.

Again I'm aware this is more in the realm of family law professionals, but I was curious if anyone here has any experience.

Thank you as always!

0Reply
75 views

Most Popular Reply

Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y

I would say that if they are going to use the income, then they also have to factor in the expenses and your lawyer can easily make that case.  

Podcast Guest on Show #244
2Reply
See this reply in the discussion

9 Replies

Jump to latestLatest
  • Chris LumLee
    Investor · Honolulu, HI · Member since 2017 · 187 posts · 108 votes
    9y

    I thought child support was calculated as a percentage of the gross income.

    0Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    Well I know it falls under their income from self employment purposes 

    My guess is they will utilize the net- or the prior year Schedule E for the rental to calculate any additional owing. I would talk to a family court specialist though.

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
    WebsiteView Page
    0Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y
    Originally posted by @Chris LumLee:

    I thought child support was calculated as a percentage of the gross income.

     I don't think this is true for self employment income sources like schedule C and E. 

    If an ex had a business that sold $100k in goods one year but had $120k in expenses the court wouldn't order him to surrender a % of the $100k...he didn't actually make any money.

    Podcast Guest on Show Pay Less Tax to the IRS This Year With THESE Real Estate Tax Strategies
    Kolodij Tax & Consulting
    WebsiteView Page
    1Reply
  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    I would say that if they are going to use the income, then they also have to factor in the expenses and your lawyer can easily make that case.  

    Podcast Guest on Show #244
    2Reply
  • Patrick LiskaPro Member
    Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
    9y

    I feel they have to go by the Net income. as @Natalie Kolodij pointed out, your income can change from year to year being self employed, there is no steady income in this business. I'll send you some bills so you show no income ;)

    this is from Legal Zoom: http://info.legalzoom.com/can-child-support-selfem...

    1Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    9y

    Correct, they do have to base it on net income. Mind you they can and will average out from 3-5 years if it can't be determined easily.

    [email protected]224-381-2660
    2Reply
  • Hiro Kitagawa
    OP
    Rental Property Investor · Plano, TX · Member since 2017 · 47 posts · 6 votes
    9y

    Thank you all for quick reply.  I'll actually make a test case out of myself and follow up here how it turns out for the state of Kentucky.  

    @Steven Hamilton II on the average - as I'm just starting out (April '17) there has not been average to consider of my rental income.  Which portion (gross, or still net) could court average out along with my w-2 income?  

    1Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    9y

    What was your income before then?  I wouldn't be too worried as you need at least a year of the rental income before they can determine anything.

    [email protected]224-381-2660
    1Reply
  • Chris Daniels
    MI · Member since 2017 · 4 posts · 3 votes
    8y

    This issue came up with me.  My lawyer told me that it is net but they do not include the depreciation in the calculation, but everything else would be included as normal expenses.  

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free