Super Lawyers
Dallas 500
Best D 2024 - 21 Years
Best Lawyers Best Law Firms
500 Leading Family Lawyers
Best of the Best Attorneys
Board Certified
International Advisory Experts
Best Lawyers Under 40
Dynamic Women in Dallas Best Family Lawyers in Dallas 2022
top attorneys Forth Worth Magazine
Leaders in Law
Power Players
National Diversity Council
Adam Mundt Certified Public
Super Lawyers Risign Stars
Top 50 Attorneys in Texas
Top 100 Attorneys in Texas
Top 50 Women Attorneys in Texas
Top 10 Blog Posts
Women Leaders in Law
Top 10 Dallas
Best of the Best Attorneys
Collaborative Divorce Texas
Family Law Top 10
Top Rated Women
Best Lawyers 2024
Lawyers of Distinction
Super Lawyers Up and Coming 100 Texas

Phantom Income in Divorce

Family Law Attorneys Representing People in Dallas

While people are generally aware that each spouse’s income is an important factor in determining property division and support obligations in a divorce, they often do not understand the nuances of what constitutes income. For example, many people have never heard of phantom income in a divorce, and are unaware of how such income could impact the financial consequences of ending a marriage. If you wish to seek a divorce and you believe you or your spouse have phantom income, it is advisable to retain legal counsel adept at handling complex marital dissolution matters to protect your interests. The skillful Dallas divorce lawyers of McClure Law Group are proficient at helping people fight for a fair outcome, and we will gather any available evidence to help you strive for a just result.

Phantom Income and Property Division

Phantom income in a divorce is income that is attributed to, but not actually received by, a person. In other words, phantom income counts towards a person’s taxable gross wages but is not available for a person to use or spend. Typically, a situation generating phantom income arises when a person owns interest in a business. For example, if a person receives earnings or profits from a business that are not distributed to the person, these amounts will likely be considered income regardless of whether the person received the earnings or profits. A person may choose to allow the business to retain any earnings or profits for self-insurance purposes, to increase or retain the business’s capital, or to be used toward expanding the business. Phantom income can also occur in instances in which a person receives forgiveness for debt obligations, such as when a person goes through bankruptcy proceedings or foreclosure, or when a student loan is forgiven.

Regardless of the reason phantom income is generated, it constitutes income for the purposes of calculating a person’s gross income in divorce cases. In Texas, community property, which is property owned by both spouses, is divided in divorce cases in a manner the court deems just. Factors a court weighs in determining what constitutes a just division include each party’s gross income and earning potential. Thus, it is important for people who are assessed phantom income to speak with an attorney regarding what measures they can take to prevent this kind of income from being counted against them.

Impact of Phantom Income on Alimony and Support Obligations

Phantom income in a divorce can impact alimony (or spousal maintenance as it is called in Texas) and child support obligations as well. Although in Texas the courts will only grant spousal maintenance in limited circumstances, the courts often consider a person’s gross monthly income in determining an appropriate amount of spousal maintenance. As such, if a person has phantom income, it can affect the obligation imposed on the person. Similarly, child support obligations are determined in part by the monthly resources of the parent paying support. If a person has phantom income, then his or her child support obligation will likely be higher than it would be absent the phantom income. While a parent may be tempted to argue that the courts should disregard phantom income in determining child support obligations, the Texas courts have specifically held that some types of phantom income should be included as part of a person’s income for determining an appropriate amount of child support.

Confer with a Knowledgeable Divorce Lawyer in Dallas

All income is relevant in a divorce, including phantom income. If you are considering ending your marriage, an attorney can advise you regarding the possible ramifications that any phantom income may have on the financial aspects of a divorce. At McClure Law Group, we take pride in helping people navigate the financial and emotional complexities that come with a divorce, and we will work hard to help you seek a fair outcome. We represent people in divorce cases in Dallas, Richardson, Garland, Irving, Fort Worth, Rockwall, McKinney, and Frisco. We also assist people with other family law matters in cities throughout Dallas, Denton, Grayson, Rockwall, Collin, and Tarrant Counties. You can reach us at 214.692.8200 or via our form online to set up a meeting.

Client Reviews
"McClure Law Group was very professional and responsive. They listened to my concerns and desires as it pertains to the service requested and I'm very pleased." Jade Nguyen
"Kelly and her team are always a pleasure to work with, and their work product always exceeds one’s expectations." George Tamke
"When I most needed professional, good quality responses McClure Law Group was there. Thank you for the service that I have received from everyone!" Norma Charles
"McClure Law Group’s team is very responsive! I have very much appreciated their communication. They are always on top of what is happening and return my calls or emails quickly." Brie Cherry
"Kelly McClure has been representing me for the past several years and has been an amazing advocate, confidant and sounding board. She is always available by phone, even when she is on vacation. She has answered my questions on weekends and always given me an honest opinion. I highly recommend this group to anyone." Heather Bell
"The McClure Law Group helped me through a very difficult divorce and they definitely had my back every step of the way. I couldn’t recommend the team enough!" Shell A.
"I could not be happier to have had McClure Law. I truly appreciate their accessibility and patience. I can tell they are very knowledgeable, and I trust their guidance. I am SO thankful I went with great lawyers to handle my family case." Victor Lollar
"Kelly is detailed oriented and she truly cares about her clients. Her knowledge of the laws and her ability to get a case resolved make her stand far above others. I highly recommend McClure for your family law needs!" Peter Morgan