The Income Tax Considerations (ITC) Adjustment

6037112 - preparing taxes - concept suicideThe ITC adjustment is made up of four possible elements, some or all of which may be present in a particular case:

Income Tax Deduction. A portion of a tax payer’s income taxes can be saved through the ability to claim an additional exemption on the parent’s tax return for each dependent child. The value of the tax savings is equal to the reduction in the parent’s taxable income (the exemption value changes from year to year), multiplied by the parent’s income tax bracket. For example, if the exemption value is $4,050, and the parent’s income tax bracket is 25%, the tax savings is $4,050 x .25 = $1,012.50 per year or $84.38 per month for each child. A similar savings is available in the Kansas income tax. This ability to claim a child as an exemption can be transferred between the parents (or “alternated” from year to year).

Child Tax Credit. The Child Tax Credit permits additional Federal taxes to be saved if a dependent child is under the age of 17 at the end of the tax year. This is a “dollar for dollar” credit against the tax, not merely a reduction in taxable income The amount of the tax credit is $1,000 for each such child. THE CREDIT IS NOT RELATED TO THE PARENT’S INCOME TAX BRACKET. For example, the tax savings is $1,000 or $83.33 per month for each qualifying child REGARDLESS OF THE PARENT’S INCOME OR TAX BRACKET. The Child Tax Credit is, however, subject to a “phase-out” or reduction in the $1,000 credit for certain high income tax payers (beginning at $75,000 if the taxpayer files “Single,” $110,000 if the taxpayer files “Married filing Jointly”

Head of Household. The Federal and state taxes saved through reduced tax rates for a taxpayer who can file as “head of household.” The value of the tax savings is equal to the reduction in the parent’s taxes arising from the parent’s lower income tax bracket. For example, a taxpayer filing “single” with a taxable income of $50,000 pays taxes in the 25% Federal tax bracket; but if filing as “head of household” is in the 15% Federal tax bracket.

The “filing status” also affects the “standard deduction” amount – the reduction in Federal taxable income ($6,300 for the “single” filer; $9,300 for the head of household filer – a gain of $3,000); in Kansas the taxable income reduction is $2,500. Finally, a head of household filer in Kansas receives an additional exemption, which further reduces taxable income.

Note that a taxpayer can file “head of household” without claiming a dependent child. The fling requirement is simply that the taxpayer is unmarried at the end of the tax year, and provided a home for a qualifying person (child, stepchild, foster child, mother, father, sibling or other blood relative) for more than half of the year. Thus, for a divorced couple with two children, both parents can claim HOH status if one of the children spends one day more than half the year with each parent.

Standard Deduction. If, instead of itemizing deductible expenses, a parent elects to take the “Standard Deduction,” a tax savings is generated to the extent that the standard deduction exceeds the total deductible expenses which could have been itemized.

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2016 KS Bar Association Meeting

Kudos to the KS Bar Association for putting on a GREAT meeting this year in Wichita. We love attending these meetings where we meet so many of our customers and even meet some new friends along the way. The downtown Wichita area is such a nice place and the Hyatt was a great location for this meeting.

The staff at the KS Bar is to be commended for their hard work to put this together. We look forward to the meeting next year in Manhattan.

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What’s the Significance of that “Version Number” at the Bottom of the Worksheet?

UPDATE!At the bottom of each page of a Bradley Software child support worksheet (and each included report, like the “Income Tax Considerations Adjustment Report”) you’ll find a copyright notice which includes a reference to “Version xx.xx.xx” followed by our website address (URL).


KS2016 Version 29.02.17 Copyright @ 1992-2016 Bradley Software LLC

The significance of the version number is that it tells you how “up to date” was the software which was used to prepare the worksheet (and allied reports).

In the weeks following the release of a new Administrative Order, we find ourselves very busy updating the prior version of the software to reflect our understanding of any changes made in the new Guidelines.

Admin Order 284 was one that really kept us hopping, because there were extensive changes in things like the Income Tax Considerations Adjustment (See our blog item “What Happened to the ITC Adjustment?”)

So if your worksheet was prepared with a higher version number than your opponent’s (e.g. 29.02.17 vs 29.01.16), you can be sure that yours was generated by the most recently cross-checked, reviewed, updated, and error-free software we’ve been able to create.

This same observation applies to our “single-case” web-based child support calculator (, frequently used by pro se litigants, and lawyers who don’t have our professional version.

It pays, therefore, to check the version number in the copyright notice, and to heed the warnings that your software should be updated.

BTW, although many judges use our software on the bench, you should also check the version number on the Judge’s worksheet to be sure it’s up-to-date. Sometimes, in the press of managing a busy docket, update warnings get overlooked by the IT department.

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Adjusted Gross Income

Adjusted Gross Income IconA box in which to enter each parent’s annual “Adjusted Gross Income” is a new required element on the Income page. Adjusted Gross Income is simply a parent’s gross income reduced by thirteen different adjustments (expenses) such as,
  • alimony paid,
  • retirement contributions,
  • student loan interest,
  • educator expenses,
  • moving expenses,
  • HSA contributions, and
  • the deductible portion of SE tax, among others.
Unlike other elements on the Income page, which can be entered either as annual or monthly amounts, the Adjusted Gross Income (“AGI”) is always an annual amount.
AGI is the starting point for determining a parent’s income tax bracket, and it bears directly on valuing dependent exemptions, child care tax credits, and child tax credits.
The Bradley calculator will suggest an estimated AGI using current monthly income and estimated alimony (maintenance), but the program does not collect enough data to provide anything more than an estimate. The suggestion is displayed on the green bar directly beneath the AGI input area. To use the suggested amount, simply double-click on
the suggestion, displayed in yellow.
Annual Adjusted Gross Income
The very best place to get a parent’s AGI, however, is from their most recent income tax return (Line 37 – Form 1040). An example of the AGI section of IRS Form 1040 appears below.
Adjustd Gross Income
Be sure to enter an AGI value for each parent. If no value is entered, the calculator cannot determine a parent’s income tax bracket, and therefore will not be able to value dependent exemptions, child care tax credits, and child tax credits, or calculate the Income Tax Considerations adjustment for Section E.
Posted in Child Support, Family Law, Taxes

Calculating Support for Partially Time-shared Children


Family line

I recently received this inquiry from a subscriber:

“I have a case in which the mother and father have shared custody of two children and the mother has primary residential custody of the third child.  The mother will claim all children on taxes.  The parties will share direct expenses with regard to the two children that they have shared custody. How do you input this on the child support calculator?”

This is another example of the “creative couple” dilemma  – How to apply the Guidelines for support where the parties’ time-sharing arrangements aren’t addressed by the Guidelines.

There are two residential “arrangements” in the scenario presented; Mom’s and Dad’s.

Since the guidelines don’t contemplate some children in a family being time-shared (and the rest not), we have to separate the children into two groups (time-shared and not time-shared) to determine the support for each group (since there should be an Equal Parenting Time child support adjustment for the time-shared children). I call this a “faux divided custody.”

In a true “divided custody,” the support for the two households (Mom’s vs. Dad’s) would be netted together to avoid each parent sending the other parent a check each month. The lower support obligation is subtracted from the higher support obligation) and the support differential would be payable by the higher obligated parent, but since we’re only separating the children for support calculations, and the support will be payable by only one parent, we’ll add the support amounts together to determine that parent’s total support obligation amount.

Proceed as follows:

Show Dad as “Residence with” parent for each of the two shared kids, & show them as time shared equally, with shared expenses.

Show Mom as the “Residence with” parent for the third, “non-shared” child.  Answer “No” to the “time shared equally?” question.

Show Mom as receiving the tax deduction on all three children.

If all three children were in the same household (rather than the “faux” divided custody) their support would be determined using a three-child support table. We can ensure the same usage in the “faux” calculation, by indicating in the Multiple Family Application section on the Children page that Mom has 1 “other child” and Dad has 2 “other children,” and selecting “Yes” for both parents.  That forces a three child table to be used for the one child in Mom’s home (counting as “other children” the two in Dad’s home) when calculating the worksheet for Mom’s home; and also a three child table to be used for the two children in Dad’s home (counting as “other children” the one in Mom’s home) when calculating the worksheet for Dad’s home. That may sound backward, but remember that in the MFA inputs, the two children in Father’s column are the two in his primary custody (although time-shared) for calculating Dad’s obligation to Mom for the single child in her household. Similarly, the one in Mom’s column in the MFA inputs is the single non-shared child in her primary custody.

 You get two worksheets (since it’s a faux “divided” custody). If Dad has the higher line F.3 obligation on the worksheet for the shared children, add the two support amounts together. Why? – the support for the shared children (altho’ reduced by the sharing) will be payable by Dad (as the higher obligated parent), and  the support for the unshared child will also be payable by Dad (since Mom is the custodial parent).

However, if Mom is the higher obligated parent for the shared children (which would make her the support Payor) and the custodial parent for the unshared child (which would make her the support recipient), netting together the two support obligations would be appropriate and the net support differential would be paid by the parent with the higher obligation to the other parent.

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Parent Time Override

percentagesAt the request of several subscribers, we’ve added an “override” capability to the Parenting Time adjustment on the Sec. E Adj. page. When Equal Parenting is not selected on the Children page, you can enter a non-standard percentage (not merely 5%, 10% , or 15%) as the adjustment in the non-custodial parent’s child support in consideration of the amount of time the child(ren) spend with the non-custodian.

We hope it will be useful in situations where the court has the discretion to reduce the child support by up to 50% in cases of extended parenting time.

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tug_of_warWhy do we say a child shown as “alternated” in the Tax Deduction To field will be ignored in calculating the Income Tax Considerations adjustment? Because the Kansas Child Support Guidelines (Administrative Order 284) provide guidance for the calculation ONLY when the parents DO NOT alternate the exemption.

Consider: tax deductions for a dependent child are allocated by the IRS on an annual basis to the custodial parent (the parent with whom the child lives the majority of the year, or the higher income parent). So for an “alternated” child, which parent’s tax rate should be used in calculating the value of the deduction?

It’s fairly easy to calculate the value of a dependent child tax deduction to a parent when you know a few key elements: the parent’s income, the child’s age, etc. But if you don’t know the parent’s income (and hence, the parent’s state and Federal tax rates), or the child’s age (and hence, whether the child qualifies for the Child Tax Credit for children under 17), it becomes impossible to determine the value of the deduction (and hence, the Income Tax Considerations adjustment) accurately.

Consequently, we recommend avoiding the “alternated” concept in designating which parent should receive the dependent child tax exemptionSince the exemption is an annual matter (and we all file our tax returns annually), just select the parent who should get the tax deduction this year (the current year). Then, rerun the child support calculation again early next year, selecting the parent who should receive the tax deduction next year.

If you run the child support calculation each year, in late December or early January, you’ll also have the benefit of updated program elements like income tax rates, and current data regarding the child’s age (for the Child Tax Credit and Child Care Tax Credit, for example), and parental incomes.

Simple, when you think about it!!

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