How Self-Employment or Business Income Affects Child Support in MN

INCOME FROM SELF-EMPLOYMENT OR OPERATION OF A BUSINESS

One of the most complicated tasks in calculating child support involves computing income when one of the parents is self-employed. In these types of situations, a different formula is used to determine a parent’s income for child support purposes.

Income from self-employment or operation of a business, including joint ownership of a partnership or closely held corporation, is calculated under Minnesota law pursuant to the following formula:

gross receipts minus costs of goods sold minus ordinary and necessary expenses required for self-employment or business operation.

Specifically excluded from ordinary and necessary expenses are:

  • amounts allowable by the Internal Revenue Service for the accelerated component of depreciation expenses;
  • investment tax credits;
  • or any other business expenses determined by the court to be inappropriate or excessive for determining gross income for purposes of calculating child support.

It is important to note that the person seeking to deduct an expense, including depreciation, has the burden of proving, if challenged, that the expense is ordinary and necessary.