James J. Gross of the Maryland Divorce Legal Crier recently had an interesting post about a subject that comes up occasionally in Texas. He discussed how a Maryland judge ruled in a case where the mother sought an increase in child support from her ex-husband, in part because he had sold his house and had realized capital gains. In that case, the Maryland judge granted an increase in child support, but a smaller increase than the mother wanted, and the judge excluded the proceeds from the house sale from income for child support purposes.
The result in Texas would likely be the same for several reasons. Just as in Maryland, capital gains here can be considered part of the net income resources of a parent. Also, like in Maryland, the judge has some discretion in how and whether the capital gains will be included when calculating child support obligations. Here are some of the considerations.
- If the house equity was considered an asset to be divided in the property division between the parties, then it would be double-dipping to also consider the same equity as income.
- If the house was bought after the divorce and flipped for a quick profit, then it could be appropriate to count the proceeds as income. They are like a paycheck in that situation, although it would be reasonable to deduct related business expenses.
- If the sale is a one-time event, it could be considered in setting the support for the limited time when the gain was received, but should not be factored into future support since the gain won't be there again.
- If capital gains are regularly received, even if the amounts are hard to predict and are not guaranteed, they are more likely to be considered as income for child support purposes.
If capital gains could be an issue for child support in your case, be sure to provide full information to your attorney.