When calculating child support in Texas, determining what income “counts” is crucial—and often more complex than it seems. While your regular paycheck obviously counts, what about bonuses? Overtime? Rental income? Investment returns? Understanding exactly what must be included in the child support calculation protects both parents’ interests and ensures children receive appropriate support.
The Broad Definition of Resources
Texas Family Code defines “resources” for child support purposes very broadly. The law aims to capture a parent’s true financial capacity, not just their base salary.
Section 154.062 of the Texas Family Code lists resources that include all income from:
1. Wages, salary, and compensation for personal services
2. Interest, dividends, and royalties
3. Self-employment income
4. Net rental income
5. All other income actually being received
6. Certain government benefits
7. Many types of resources not commonly considered
Let’s break down each category:
Employment Income
Salary and Wages
- Regular paycheck from employment
- Hourly wages
- Salaried compensation
- Full-time or part-time earnings
All employment income counts, regardless of:
- Number of jobs
- Hours worked
- Employment duration
Overtime
Always Included:
- Regular, consistent overtime
- Expected overtime as part of standard schedule
- Mandatory overtime
May Be Included:
- Voluntary but regularly worked
- Historical pattern of overtime work
Courts Consider:
- Whether overtime is guaranteed
- History of overtime earnings
- Industry standards
- Whether parent can control overtime availability
Example: A nurse who works overtime shifts most weeks should expect that overtime to count toward child support, even if it’s “voluntary,” because it’s a regular part of their income pattern.
Bonuses
Generally Included:
- Annual performance bonuses
- Quarterly bonuses
- Holiday bonuses
- Signing bonuses
- Retention bonuses
How They’re Counted:
- If regular and expected: included in annual income
- If irregular: may be averaged over time
- Courts look at history and likelihood of continuation
Example: If you’ve received a $10,000 annual bonus for the past three years, expect it to count toward child support, adding roughly $833/month to your income calculation.
Commissions
Always Included:
- Sales commissions
- Performance-based compensation
- Piece-work pay
- Any commission structure
Calculation Method:
- Average over recent period (often 12-24 months)
- Consider earning patterns and trends
- Adjust for known changes in circumstances
Tips and Gratuities
Must Be Included:
- Tips from service industry employment
- Gratuities
- Service charges
Challenges:
- Often not fully reported
- Cash tips may not appear on pay stubs
- IRS reporting may understate actual tips
Courts May:
- Use tax returns as evidence
- Impute income based on industry standards
- Consider lifestyle and expenses that exceed reported income
Example: A server reporting $25,000 in tips annually must include that in child support calculations, even though much may be cash income.
Business and Self-Employment Income
Self-Employment Income
For business owners, freelancers, contractors, and self-employed individuals:
What Counts:
- Net income from self-employment
- Business profits
- Distributions from partnerships or S-corps
- LLC income
- Freelance earnings
- Contractor payments (1099 income)
How It’s Calculated:
- Gross receipts MINUS ordinary and necessary business expenses
- Cannot deduct personal expenses disguised as business expenses
- Cannot deduct depreciation on luxury items used personally
What You CAN’T Deduct:
- Excessive salary to relatives doing minimal work
- Personal travel disguised as business travel
- Personal vehicle expenses beyond business use percentage
- Home office deductions for space used personally
- Entertainment expenses that are really personal
- Depreciation on assets used personally
- Retirement contributions
What You CAN Deduct:
- Cost of goods sold
- Necessary equipment
- Actual business supplies
- Business insurance
- Legitimate employee salaries
- Rent for business space
- Professional services
- Business loans and interest
- Marketing and advertising
Courts Scrutinize Self-Employment Income:
Self-employed parents have the ability to manipulate reported income, so courts carefully examine:
- Tax returns (personal and business)
- Profit and loss statements
- Bank statements
- Business records
- Lifestyle expenses
- Cash flow
Example: A dentist with a practice grossing $500,000 cannot claim $450,000 in “expenses” when those expenses include luxury car “depreciation,” family “business travel,” and a spouse on the payroll who doesn’t actually work there.
Investment and Passive Income
Interest and Dividends
Included:
- Bank account interest
- CD interest
- Stock dividends
- Bond interest
- Money market returns
- Cryptocurrency gains realized
Note: These are actual received amounts, not unrealized gains.
Rental Income
Net rental income from real property:
Calculation:
- Gross rental income
- MINUS actual necessary expenses:
- Property tax
- Insurance
- Maintenance and repairs
- Property management fees
- HOA fees
- Utilities (if landlord pays)
- Mortgage interest (but NOT principal)
Cannot Deduct:
- Mortgage principal payments
- Improvements and upgrades (unless ordinary repairs)
- Excessive depreciation
Example: Rental property generates $2,000/month rent. Expenses are $1,200/month (mortgage interest $600, property tax $300, insurance $150, maintenance $150). Net rental income for child support: $800/month.
Royalties
Included:
- Oil and gas royalties
- Mineral rights royalties
- Intellectual property royalties (book, music, patent, etc.)
- Licensing fees
All royalty income counts toward child support resources.
Capital Gains
When They Count:
- When gains are actually realized (sold)
- Not paper gains or unrealized appreciation
Example: If you sell stock and realize a $50,000 gain, that counts as income for that year’s child support calculation, even though it’s a one-time event.
Retirement and Pensions
Retirement Benefits
Generally Included:
- Social Security retirement benefits (received by parent, not child)
- Pension payments
- 401(k) distributions
- IRA withdrawals
- Annuity payments
- Military retirement pay
Why It Counts:
These are income resources available for supporting the child.
Important Distinction:
– Contributions to retirement (pre-retirement): Generally not counted as current income but reduce taxable income
– Distributions from retirement (post-retirement): Count as income
Workers’ Compensation
Included in Resources:
- Workers’ compensation benefits
- Lost wage replacement
- Permanent disability benefits
May Not Count:
- Pure medical benefits
- Reimbursements for medical expenses
Unemployment Benefits
Included:
- Unemployment compensation
- Extended unemployment benefits
- Any wage-replacement government benefits
Disability Benefits
Usually Included:
- Social Security Disability Insurance (SSDI)
- Private disability insurance payments
- VA disability benefits
- Any disability payments received
Exception:
- Supplemental Security Income (SSI) does NOT count toward child support
- SSI is means-tested and intended for the disabled person’s basic needs
What Does NOT Count
Not All Income Is Counted
Certain income is specifically excluded:
Return of Principal or Capital
- Repayment of loans you made
- Return of capital from investments
- Recovery of your own principal
Accounts Receivable
- For self-employed: money customers owe but haven’t paid
- Can’t count it until actually received
Benefits from Means-Tested Programs
- Supplemental Security Income (SSI)
- Food stamps (SNAP)
- Medicaid/CHIP (for the parent)
- TANF (Temporary Assistance for Needy Families)
- Other welfare benefits
Foster Care Payments
- Money received for foster children
- Not part of parent’s personal income
Student Loans and Scholarships
- Educational financial aid
- Student loan proceeds
- Grants and scholarships
- GI Bill education benefits
Child Support You Receive
- Child support from other relationships
- Not counted toward your resources
- (But you are expected to support your other children)
Gifts (Generally)
- Occasional gifts
- One-time windfalls
- Lottery winnings (though courts examine if pattern of gambling income)
However, regular large gifts (like monthly payments from parents) MAY be counted if they represent a reliable income source.
Special Situations
Remarriage and New Spouse’s Income
General Rule: Your new spouse’s income does NOT count toward your child support obligation.
Exception: If your new spouse’s income allows you to live beyond your means, courts may impute income or question your claimed expenses.
Example: You claim you can’t afford child support, but you live in an expensive home your new spouse owns. Courts may not buy that you’re truly unable to pay.
Imputed Income
Sometimes courts will attribute income to a parent who:
Is Voluntarily Unemployed:
- Quit job to avoid support
- Refuses to seek work despite ability
- Takes lower-paying job to reduce support
Is Voluntarily Underemployed:
- Works part-time when capable of full-time
- Takes position well below qualifications
- Reduces income to minimize support
Courts Consider:
- Prior employment history
- Education and skills
- Available job market
- Physical and mental ability to work
- Reasons for employment status
Example: A lawyer who was earning $150,000/year quits to become a barista making $25,000/year. The court may impute income based on the lawyer’s earning capacity, not actual current income.
Multiple Children from Different Relationships
When you have children with multiple people:
The percentage-of-income method accounts for this:
Total Percentage Applied:
- Three total children (one with current case, two elsewhere): 30%
- Calculate support for ALL children: Income × 30%
- Divide proportionally among families
Example:
- You have three children: two with ex-wife A, one with ex-girlfriend B
- Net monthly resources: $5,000
- 30% of $5,000 = $1,500 total child support obligation
- To A (2 children): (2/3) × $1,500 = $1,000
- To B (1 child): (1/3) × $1,500 = $500
Existing Support Doesn’t Reduce Your Resources:
Child support you’re paying for other children doesn’t reduce your “net resources” for calculating new support—but the percentage method accounts for multiple children.
Documentation and Proof
What Courts Want to See:
For Employed Individuals:
- Recent pay stubs (2-3 months)
- W-2 forms
- Tax returns (2-3 years)
- Employment contracts
- Benefits statements
For Self-Employed:
- Personal and business tax returns (2-3 years)
- Profit and loss statements
- Balance sheets
- Bank statements (business and personal)
- Business records
- 1099 forms
For All Income Sources:
- Bank statements
- Investment account statements
- Rental agreements and property records
- Proof of all income sources
- Documentation of expenses (for net calculations)
Calculating Net Monthly Resources
The Process:
1. Identify Gross Annual Income from All Sources
2. Subtract Allowable Deductions:
- Social Security/Medicare taxes
- Federal income tax (appropriate for filing status)
- State income tax (if applicable)
- Union dues
- Cost of health insurance for the child
3. Divide by 12 to Get Monthly
What You CANNOT Deduct:
- Your own living expenses
- Debt payments (credit cards, car loans, etc.)
- Retirement contributions
- Support for other children
- Mortgage payments
- Any personal expenses
The $9,200 Cap
Important Limitation:
Texas applies the percentage-of-income method to the first $9,200 per month in net resources.
Above the Cap:
- Court has discretion
- May order additional support based on proven child needs
- Not automatic
Example:
- Net monthly resources: $15,000
- One child (20%)
- Guideline support: $9,200 × 20% = $1,840
- Court MAY order more if child has demonstrated needs exceeding guideline amount
Common Issues and Disputes
Cash-Based Income
For cash-heavy industries (restaurants, contractors, retail):
- Difficult to verify
- Courts may rely on tax returns
- May examine lifestyle to determine if reported income is accurate
- Bank deposits can reveal unreported cash income
Fluctuating Income
For variable income:
- Average over 12-24 months
- Consider trends (increasing vs. decreasing)
- Update as circumstances change
- May require periodic reviews
Cryptocurrency and Digital Assets
- Realized gains count
- Difficult to discover/verify
- Courts increasingly aware and scrutinizing
- Financial disclosure should include crypto holdings
The Bottom Line
Texas child support law casts a wide net when determining what income counts toward a parent’s support obligation. Nearly every form of income and financial resource is included—from obvious sources like wages to less obvious ones like rental income, royalties, and investment returns.
Whether you’re calculating support in Houston’s diverse economy, navigating Dallas’s corporate landscape, working through Austin’s tech and startup scene, managing support in San Antonio’s military-influenced market, or addressing calculations in Corpus Christi’s port and industry environment, understanding what counts as income is essential.
The key is full, honest disclosure of all income sources. Attempting to hide or minimize income rarely succeeds and can result in serious consequences, including contempt of court, retroactive support adjustments, and loss of credibility. Work with experienced attorneys and be prepared to document every income source to ensure accurate, fair child support calculations that truly support your children’s needs.