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What is considered gross income for child support purposes?

People have many different types of jobs in Tennessee. Many people work for other companies as employees and receive a W-2 at the end of each year. It is generally fairly easy to determine a person’s gross income when one’s only income is through this type of employment. However, there are many other types of jobs and people have many different sources of income. People know that exact record keeping of these sources of income are important for taxes, but this record keeping is also important for determining child support in a divorce as well.

The determination of a parent’s child support obligations begins with the gross income of each parent. Gross income includes income from pretty much all sources. It could be wages earned from employment, self-employment income, commissions, overtime pay, bonuses, severance pay, interest and dividend pay, annuities, payment from retirement plans and individual retirement accounts (IRAs), capital gains, prizes, workers’ compensation benefits, alimony and many other sources of income. Gross income can also include fringe benefits, such as a company car, if the benefit lowers the parent’s personal living expenses.

For self-employment income though, the gross income for the parent is not what the parent claims on his or her tax return. The self-employed parent can only deduct reasonable and necessary deductions needed to run the business. This means that the courts will not allow deductions for excessive travel, promotions, personal expenses and others that go beyond what the parent needs to incur to run the business. The parent will also not be allowed to deduct depreciation for equipment from their income for child support purposes.

Oftentimes when parents are divorced or separated in Tennessee, one parent pays the other child support each month to pay for the child’s expenses. This is determined by looking at a number of different factors. This whole process starts with determining each parent’s gross income. However, after that is determined there are other factors that go into determining the actual child support obligation. Attorneys in Tennessee understand these factors and may be able to guide one through the process.

Source: tn.gov, “Child Support Guidelines,” Oct. 30, 2017

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