Child Support and the Self Employed

When first created Indiana's Child Support Guidelines posed problems for the self-employed but that problem no longer exists. However, calculating how much the self-employed needs to pay in support still has its wrinkles.

The Guidelines say this about the self-employed:

a. Self‑Employment, Rent and Royalty Income. Calculating weekly gross income for the self‑employed or for those who receive rent and royalty income presents unique problems, and calls for careful review of expenses. The principle involved is that actual expenses are deducted, and benefits that reduce living expenses (company cars, free lodging, reimbursed meals, etc.) should be included in whole or in part. It is intended that actual out‑of‑pocket expenditures for the self‑employed, to the extent that they are reasonable and necessary for the production of income, be deducted. Reasonable deductions for capital expenditures may be included. While income tax returns may be helpful in arriving at weekly gross income for a self‑employed person, the deductions allowed by the Guidelines may differ significantly from those allowed for tax purposes.

The self‑employed pay F.I.C.A. tax at twice the rate that is paid by employees. At present rates, the self‑employed pay fifteen and thirty one‑hundredths percent (15.30%) of their gross income to a designated maximum, while employees pay seven and sixty‑five (7.65%) to the same maximum. The self‑employed are therefore permitted to deduct one‑half of their F.I.C.A. payment when calculating Weekly Gross Income.

Ruppert & Schaefer, P.C. of Indianapolis, Indiana has a good explanation of all this on its web site under Child Support Calculations.