"But, Judge, I am going to be making less money this year!"
It is the cry of every child support paying parent who receives overtime or owns their own business. Nearly every such parent can find some reason in the midst of a divorce why his/her income is going to go down significantly in the near future. Generally, judges do not buy it.
If you (or your spouse) have a history of earning a significant amount of overtime on a fairly regular basis, it is going to get included in your income for purposes of calculating child support. If you get a bonus, it is going to get included in calculating your child support. Kentucky bases child support calculations on gross income. Under the child support statute, gross income includes "salaries, wages, retirement and pension funds, commissions, bonuses, dividends, severance pay, pensions, interest, trust income, annuities, capital gains, Social Security benefits, workers' compensation benefits, unemployment insurance benefits, disability insurance benefits, Supplemental Security Income (SSI), gifts, prizes, and alimony or maintenance received."
If you are self-employed and you have managed to show the IRS that you do not make much money through the magic of accelerated depreciation, get ready for a rude awakening. Although Kentucky will allow you to count depreciation to get to your gross income, you can only use straight-line depreciation which is much less generous. Additionally, you can deduct expenses that are necessary for the production of income. However, if you are running a lot of expenses for personal use through the business, they may be added back in as part of your income. This may include a vehicle, cell phone, and even certain insurance payments.
Although child support in Kentucky is a matter of applying the formula correctly, getting the right numbers to put into that formula can be difficult.
Photo courtesy of Tax Credits
Labels: accelerated depreciation, calculation, child support, depreciation, gross income, income, overtime, salary, self-employed, straight line