Texas Law on Child Support and Business Income: How Is It Assessed?

Understanding Child Support in Texas

In the state of Texas, child support is a legal duty imposed on noncustodial parents to contribute to the financial care and costs associated with raising their children. The Texas Family Code provides guidelines that courts use to determine the amount of support that should be paid, based on the noncustodial parent's income and other relevant factors.

Business Income and Child Support Assessment

When it comes to business owners or self-employed individuals, determining child support can become complex. Texas law seeks to ensure that all forms of income are considered when calculating child support payments. This includes not just salary but also dividends, bonuses, and other financial gains derived from business interests.

The court will examine the noncustodial parent's total net resources, which encompasses:

Once the court has a clear picture of the noncustodial parent's income, it applies a percentage scale based on the number of children requiring support. For instance, 20% of net resources may be allocated for one child, with an incremental increase for additional children.

Distinguishing Personal Income from Business Revenue

A challenge arises when distinguishing personal income from business revenue. Business owners often reinvest earnings back into their enterprises, which can reduce their personal taxable income. Texas courts are adept at discerning this distinction. They will closely scrutinize tax returns, profit and loss statements, and other financial documents to distinguish between genuine business expenses and personal draws or dividends that should be included as income for child support purposes.

Historical Case References

A landmark decision in Texas is In re Marriage of Joyner, which set a precedent for considering retained earnings in privately held companies when assessing child support obligations. The ruling highlighted that if retained earnings are not distributed due to the noncustodial parent's control over the business, such earnings might still be counted as available resources for child support.

Adjustments and Special Considerations

Courts can adjust child support upward or downward based on various factors including the child's specific needs, the custodial parent's income, and any special circumstances such as disability. Additionally, if a noncustodial parent's net resources exceed a certain threshold (currently set at $9,200 per month), the court may deviate from guideline percentages when setting the child support amount.

Conclusion

Navigating child support calculations involving business income can be a daunting task in Texas. It is essential for business owners to maintain transparent financial records and consider consulting with legal professionals who specialize in family law. Ultimately, ensuring accurate assessment of business income not only complies with legal requirements but also serves the best interests of the children involved.