Calculating the amount of rental income that is to be considered for child support can be complicated.
This article aims to simplify the process and clarify how to calculate rental income for child support.
Steps to Calculate Rental Income for Child Support
Calculating rental income for child support involves the following steps:
Step 1: Determine Gross Rental Income
The first step is to determine the gross rental income. This is the total rental income received from the tenant(s) before any expenses are deducted.
Step 2: Deduct Allowable Expenses
Next, you can deduct allowable expenses. These are expenses that are necessary to maintain and operate the rental property.
Allowable expenses include:
- Property taxes.
- Mortgage interest.
- Insurance premiums.
- Repairs and maintenance costs.
- Depreciation (in some states, depreciation is not allowed).
- Utilities.
- Property management fees.
- Homeowner association fees.
- Accountant and legal fees.
Step 3: Calculate Net Rental Income
Once you have deducted allowable expenses from the gross rental income, you will have the net rental income. This is the amount that will be used for child support calculations.
Step 4: Determine the Percentage of Income
The next step is to determine the percentage of income that will be used to calculate child support. This will depend on the number of children the child support is being calculated for and the income of the non-custodial parent.
Step 5: Calculate Child Support
Using the net rental income and the percentage of income, you can calculate the child support owed or to be received.
An Example of How to Calculate Net Rental Income for Child Support
Let’s say that the parent responsible for paying child support owns a rental property that generates rental income. To calculate the rental income for child support purposes, you would need to do the following:
Step 1: Determine Gross Income
If the rental property generates $2,000 in rent each month, the total gross rental income for the year would be $24,000.
Step 2: Deduct Allowable Expenses
Next, you can deduct allowable expenses. Let’s say the following are the expenses on the rental property:
- Property taxes – $1,500
- Mortgage interest – $500 per month, for a total of $6,000 yearly.
- Insurance premiums – $800
- Repairs and maintenance costs – $2,000
- Depreciation (in some states, depreciation is not allowed) – $1,200
- Utilities – $500
- Property management fees – $1,200
- Homeowner association fees – $1,200
- Accountant and legal fees – $1,000
- TOTAL allowable expenses – $15,400
Step 3: Calculate Net Rental Income
Deducted allowable expenses from the gross rental income, you will have the net rental income.
In this example, it would be $24,000(Gross rental income) – $15,400 (Total allowable expenses) = $8,600 in net rental income.
$8,600 would be used in the calculations to determine child support.
The actual amount of the child support calculation will vary based on the state where you live. It’s always a good idea to consult with an attorney or child support professional for guidance on accurately calculating child support based on your specific situation.
FAQs:
Q. Does rental income affect child support payments if I am the custodial parent?
Yes, receiving rental income will affect child support payments, even if you are the custodial parent.
Q. How do I know what percentage of my income is derived from rental income?
To determine the percentage of income derived from rental income, divide the net rental income by the parent’s total income.
Q. Can I include rental losses when calculating rental income for child support?
Yes, if your rental property loses money, the loss can be deducted from your income when calculating child support.
Q. Do I need to provide proof of my rental income when calculating child support?
Yes, you must provide proof of your rental income when calculating child support, so it is vital to keep accurate records.
Conclusion
Calculating rental income for child support can be complex, but ensuring that child support is calculated accurately is crucial. Understanding the steps involved can help you calculate rental income correctly and avoid potential legal issues.