Rental property and child support

Naperville, Illinois
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Rental property and child support

Paul Flynn
Naperville, IL · Member since 2017 · 29 posts · 8 votes

Before you all start hating me thinking I'm trying to get away from supporting my children that is beyond false. At my weekly job my nine-to-five I take home about $4,500 per month my child support order is for $2,100 per month I've been forced to sell my home and move back in with my parents because I can no longer afford to live the sale of the house will leave me with about $150,000 in cash and I'd like to possibly look into buying rental property so that way I have extra income so I can afford to live. I am not against paying child support but I'm already paying $2,100 per month if I get a rental property I'll just o more money so my question is is there a way that I can own a rental property may be under an LLC that will separate me from the property to hide it from child support. I know this sounds terrible but I'm already paying $2,100 per month which is more more than enough the mother of my children lives with her parents and has zero bills so it's all going to her pocket. I know this sounds terrible trying to hide money from child support but trust me I take great care of my kids I see them all the time and I pay my $2,100 per month every month. But I need extra income in order for me to be able to afford my own place my kids can come visit before you all start bad-mouthing me please understand my situation I love my kids I pay for my kids they have my health insurance I pay my child support every month of $2,100 I pay 80% of out-of-pocket expense for medical and schooling I do everything I can for them and I just can't afford to live anymore but I need extra in come please help

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Jonathan KlemmBusiness Member
Moderator
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
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@Paul Flynn - Sounds like a tricky situation to be in.  I am here in Chicago and not far from you.

My suggestion is to shift your mindset.  Instead of trying to figure out how you can shield more money why don't you spend that time figuring out how to make more money.

I know for myself, that I was raised thinking I had to save my way to wealth, but once I figure out I could grow my way to wealth using an abundance mindset doors opened up in ways I could have never imagined in my previous mindset.

Hope that makes sense. 

[email protected]
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Paul Flynn

    1. Not judging

    2. Putting it in a LLC I do not believe will do any good as it's a pass through entity if you have to show tax returns.

    Does the child support have a kicker that says if you make more $ then you have to pay more?

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    I agree with Chris's comment.  If you earn more, do you have to pay more?  It should be a set amount.

    0Reply
  • Paul Flynn
    OP
    Naperville, IL · Member since 2017 · 29 posts · 8 votes
    4y

    Yes the more I make the more I pay

    0Reply
  • Paul Flynn
    OP
    Naperville, IL · Member since 2017 · 29 posts · 8 votes
    4y

    In Illinois the way it works is they go off of 3 years tax returns gross income they then find the median and base child support off that so with rental being taxable income that will raise my taxable income therefore raising my child support in Illinois

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
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    Quote from @Paul Flynn:

    In Illinois the way it works is they go off of 3 years tax returns gross income they then find the median and base child support off that so with rental being taxable income that will raise my taxable income therefore raising my child support in Illinois


     I'd still run the numbers to see how it would look. talk to your lawyer.  If it is gross income, then you'd be hit really hard and it would be almost impossible to find a place that cash flows after your child support.

    0Reply
  • Paul Flynn
    OP
    Naperville, IL · Member since 2017 · 29 posts · 8 votes
    4y

    @Theresa Harris

    Exactly. The laws are ridiculous.... how can I afford to live? This is why I need a way to hide the income from child support. So my support doesn't go up even more

    Like I said I'm already paying 2100 month!!!! I only make 4500 month take home! Ugh

    0Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    4y

    You could petition the court for some relief. They should leave you enough to live on. Where did they come up with that amount?

    0Reply
  • Neal FridrichPro Member
    Real Estate Agent · Bloomington, IL · Member since 2019 · 23 posts · 8 votes
    4y

    @Paul Flynn

    Paul if you were to increase your income via real estate, you would be increasing your income with cash flow and hopefully equity. Meaning if you added $100 in income a month the court would ask for a chunk of that. Yes you have to pay more in child support but at the same time you’re still increasing your net monthly take home and building equity all in one play.

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  • Mark F.Pro Member
    Rental Property Investor · Elgin, IL · Member since 2016 · 326 posts · 270 votes
    4y

    Hey @Paul Flynn - I was there and know they feeling my friend, I worked more and more an more overtime at my W2 to provide for my children and be able to afford to live and provide them with a home and things when they were with me, the more I worked the more I paid year after year after year. It's a vicious cycle for the guys that work hard and do what they are supposed to but no way around it, the more you make the more you have to pay I'm sorry to say. 

    As mentioned above, rental income does and will count toward your gross earnings and therefore will most likely subject to child support withholdings. You could/should file a petition for a reduction if what you are paying is a hardship, doesn't mean the judge will award it but take a look at the Illinois CS calculator and see what it says. 

    https://www2.illinois.gov/hfs/ChildSupport/parents/Pages/ChildSupportEstimator.aspx

    https://www.illinoislegalaid.o...

    What you are paying could be appropriate, based on Illinois law, depending on how many children you have, how much time they are with you and how much the mother earns. The State of Illinois changed the law several years ago, hell when I had to pay it was a straight % based calculation didn't matter the mother made more then me and that we had the kids the same amount of time, truth be told it is a much "fairer" system now - not perfect but definitely better than the old way. 

    Lastly, this is a PUBLIC forum, if she and/or her attorney search your name in Google and see this (assuming it is your real name) and they bring this to the Judge that you are trying to hide paying child support - believe me it WILL NOT go over well.   Just my $.02 sir


    Mark

    1Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    4y

    @Paul Flynn - Sounds like a tricky situation to be in.  I am here in Chicago and not far from you.

    My suggestion is to shift your mindset.  Instead of trying to figure out how you can shield more money why don't you spend that time figuring out how to make more money.

    I know for myself, that I was raised thinking I had to save my way to wealth, but once I figure out I could grow my way to wealth using an abundance mindset doors opened up in ways I could have never imagined in my previous mindset.

    Hope that makes sense. 

    [email protected]
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  • Calvin Thomas
    Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
    4y

    Prob. a good idea to remove your name from the thread and any other personally identifiable information so it's not caught up in Google or Bing. Also a good idea to remove your picture and exact location. You can, however, place it in an LLC and elect C-corp status. Thus, you have additional income, just not in your name. That would be the only way to legally hide your income from the child support agency. Plus, it would be a good idea not to talk about your rental properties, when you have then, to anyone else. News seems to travel fast. Loose lips cost $$$. Not sure how you can get the money to you from the LLC though. You need to talk to a family attorney as well as a CPA to make sure everything is setup correct. It's one thing to hid from your baby momma and the child support agency. Completely different when you are messing with the IRS and Dept. of revenue for Illinois. The taxing authorities are much worse to deal with than any other agency.

    1Reply
  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    4y

    @Paul Flynn

    I would recommend talking to an attorney and accountant about this but as others have mentioned if it's on your tax return it's going to be factored into your child support calculation so I don't see a solution to making more money without your child support payment increasing.

    1Reply
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    4y

    Family law in the US is really bad. Women are actually incentivized to divorce. Definitely talk to a lawyer / CPA. One question to ask about is tax write offs. If you have tax write offs for almost all of your rental income would that increase your child support to an even more ridiculous level? You might also change your investment strategy to focus more on unrealized gains (eg appreciation) rather than taxable income.

    0Reply
  • Michael K.
    Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes
    4y

    @Paul Flynn This is a place to ask questions openly, no judging. Fortunately, there is an easy solution to your problem. The whole reason people get into rental real estate is that on paper you are not making much money, meaning you are paying only minimal taxes on your rental income. Add to that, in the current market you would be lucky to find a ready-to-go property with much cash flow at all. So after the mortgage interest deduction, operating expenses, Capex/repairs, and depreciation, you will not have much left to be taxed (the net on your schedule E), even though in reality you will have put yourself in a much more favorable financial position. I don't think you should feel guilty for doing this, as realistically you are not going to be raking in the dough as a new landlord anyway. Hope this helps!

    0Reply
  • Michael K.
    Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes
    4y
    Quote from @Theresa Harris:

    I agree with Chris's comment.  If you earn more, do you have to pay more?  It should be a set amount.


     Its a %

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    4y

    @Paul Flynn no one has mentioned this, but rental income is taxed very differently than W2 income. You have depreciation that will offset all or most of the income you make. I am no expert at your situation, but I do know that most rentals show up as a loss for tax purposes due to depreciation. You also have benefits like being able to accelerate depreciation on larger properties through cost segregation which creates an even larger paper loss. 

    I agree with @Jonathan Klemm though. You are in a tight spot, but you want to pass on a different mindset to your kids. Who wants to coupon clip their way through life? If you are giving 40% of your income to child support, why not double down and figure out a way to grow so that 40% is not crippling you? Rentals are definitely one way. 

    2Reply
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