Hidden Income and Imputed Income in Texas

When income is difficult to verify

Texas child support is based on the paying parent's net monthly resources. When a parent is self-employed, paid in cash, works variable hours, or appears to be earning less than they are capable of, the court has tools to address the gap between reported income and actual earning capacity.

Imputing income for voluntary underemployment

Under § 154.066, if a parent is voluntarily unemployed or underemployed, the court can impute income — that is, calculate support based on what the parent could earn rather than what they currently earn. The court looks at the parent's:

• Work history and prior earnings
• Education and occupational qualifications
• Physical and mental health
• Available opportunities in the local job market
• Wages for similar work in the same area

Self-employment and cash income

Self-employed parents often show low income on tax returns while living well. Texas courts look beyond reported income to actual resources, including:

• Business revenue and cash flow before deductions
• Personal expenses paid by the business (car, phone, meals, travel)
• Depreciation and non-cash deductions that inflate the paper loss
• Lifestyle evidence — vacations, vehicles, property
• Bank statements showing deposits inconsistent with reported income

Evidence to gather

To support an imputation or hidden income argument, gather:

• Three to five years of federal tax returns (personal and business)
• Six to twelve months of bank statements (all accounts)
• Business profit-and-loss statements
• Credit card statements showing spending patterns
• Screenshots of social media showing travel, purchases, or lifestyle inconsistent with reported income
• Records of cash-paying clients (invoices, contracts, receipts)
• Prior income records (LinkedIn profiles, prior tax returns, paystubs from previous employment)

Minimum wage presumption

Under § 154.068, if the court cannot determine the obligor's income, it may apply a presumption that the obligor earns the federal minimum wage times 40 hours per week. This is a floor, not a ceiling — if evidence shows the parent can earn more, the court will use the higher figure.

Expert witnesses

In high-asset cases, the court may benefit from expert testimony. A forensic accountant can trace business income, identify personal expenses run through a business, and provide an independent calculation of actual earnings. A vocational expert can testify about the labor market and what a person with a given background could earn. In cases where large sums are at stake, expert testimony can be decisive.