August is Child Support Awareness Month. The attorneys at PURCELL STOWELL PC offer sound bites on some often misunderstood aspects of the system.
Parents sometimes lose sight of the fact that child support is an obligation owed only by the parents of the child, to shocking results. Step-parents don’t have the duty to support a child, even though in reality they often do. Because the new spouse does not have an obligation to support the child, his or her income is not considered when determining child support, except for one counter-intuitive reason. If a new spouse earns a significant amount of income, it could put the actual parent into a higher tax bracket, meaning that the support calculations would deduct more from the actual parent’s income for tax consequences.
This was an issue in a case I handled where Mother earned less than Father and as such Father paid support. Mother remarried and her new husband had a very high income. Father thought this would decrease his support, when it actually raised his support because Mother’s net income after taxes was actually less than it had been before because she had been bumped up two tax brackets by filing jointly with her new husband.
Many of my clients are under the false impression that the higher their monthly expenses, the less they will pay in child support. Child support is based on your net income – i.e. income available after taxes have been paid – not on monthly expenses. This means that the more tax deductions you have, the more you will pay in child support (or, conversely, the less you will receive in child support). My clients are often surprised to learn that after buying a new house with a large monthly payment, their child support goes up. This is because along with that new house comes the tax deductions for property taxes and interest payments. The program that calculates child support looks at these additional tax deductions as you receiving additional income. Similarly, if you contribute to a 401(k) – which is in pretax dollars – your support payment will also increase because the program views these contributions as tax free money (even though it really isn’t). The bottom line is this – the more tax deductions you have, the more you will pay (or the less you will receive) in child support.