Montana Divorce Guide

Child Support When a Parent Is Self-Employed in Montana

For a business owner, income for child support is not the bottom line of a tax return. The guidelines have their own rules for expenses, depreciation, and proof.

Written by

Misty Gaubatz, Partner, A&M Law

Licensed Montana attorney and co-founder of A&M Law. Over two decades in the practice of law focusing on family law, criminal defense, and DUI defense, with federal and state court experience and a Certificate in Mediation.

Montana Bar #122346+ years as an attorney, with over two decades working in the lawReviewed by Ashley HurlbertLast reviewed: September 27, 2026

When a parent is self-employed, Montana child support is calculated with the same guidelines as for anyone else, but income is measured differently. For a business owner, actual income is "gross receipts minus reasonable and necessary expenses required for the production of income" (ARM 37.62.105(2)(b)). That is not always the number at the bottom of a tax return. This page, part of our Montana Divorce Guide, explains the rules for either parent: the one who owns the business and the one who does not.

The Rules for Business Income

Item	How the guidelines treat it	Rule
Starting point	Gross receipts minus reasonable and necessary expenses required for the production of income.	ARM 37.62.105(2)(b)
Depreciation	Straight line depreciation for vehicles, machinery, and other tangible assets required to produce income may be deducted.	ARM 37.62.105(2)(b)(i)
Mixed-use expenses	If an expense has a personal component, only the business component is deductible.	ARM 37.62.105(2)(b)(ii)
Business losses	A net loss from a business or farm may not offset other income, unless the parent has related businesses.	ARM 37.62.105(2)(b)(iii)
Investment losses	Losses outside the normal course of business may not reduce other income.	ARM 37.62.105(2)(b)(iv)
Perks	Noncash benefits such as personal use of a vehicle, housing, and payment of personal expenses count as income.	ARM 37.62.105(2)(c)

The rule applies to "parents who receive income or benefits as the result of an ownership interest in a business or who are self-employed." It is not limited to sole proprietors.

Why the Tax Return Is Not the Final Word

The guidelines say so directly: "Income for child support may differ from a determination of income for tax purposes" (ARM 37.62.108(5)), and allowable deductions "differ from allowable deductions for tax purposes" (ARM 37.62.110(2)). Tax law allows deductions that reduce taxable income without reducing the money available to a household. The guidelines ask a different question, which is what resources a parent has available for child support.

This cuts both ways. A business owner is entitled to subtract real costs of producing income. The other parent is entitled to have expenses that are not required to produce income left out. Neither parent's position is presumed to be in bad faith, and a legitimate tax strategy is not misconduct. It simply may not carry over to the support worksheet.

Depreciation

Depreciation has its own rule. The guidelines allow "straight line depreciation for vehicles, machinery, and other tangible assets ... if the asset is required for the production of income. The party requesting such depreciation shall provide sufficient information to calculate the value and expected life of the asset. Internal Revenue Service rules apply to determine expected life of assets" (ARM 37.62.105(2)(b)(i)).

The Child Support Services Division's worksheet instructions carry this out: where accelerated depreciation or a Section 179 expense was claimed on the return and the straight line amount is less, depreciation is converted to straight line. For a ranch, a construction company, or any business with heavy equipment, that conversion can change income for child support noticeably in the years after a large purchase.

Personal Expenses and Noncash Benefits

"If business expenses include a personal component, such as personal use of business vehicles, only the business component is deductible" (ARM 37.62.105(2)(b)(ii)). Separately, actual income includes "the value of noncash benefits, including but not limited to in-kind compensation, personal use of vehicle, housing, payment of personal expenses, food, utilities, etc." (ARM 37.62.105(2)(c)).

So a business that pays for the owner's phone, truck, fuel, or housing is providing income to the extent those items are personal. Sorting this out takes records that separate business use from personal use. Mileage logs and clear bookkeeping help the owner as much as they help the other parent.

Losses and Fluctuating Income

A business or farm loss cannot be used to reduce a parent's wages or other income for child support. The exception is for related businesses, and the rule gives an example: an artist who sells paintings through a gallery and also owns a company that publishes calendars of the paintings may offset a loss in the publishing company against the gallery's profit, because the two enterprises are related (ARM 37.62.105(2)(b)(iii)).

Because self-employment income moves from year to year, the guidelines favor averaging. Seasonal or fluctuating income "may be averaged over a period sufficient to accurately reflect the parent's earning ability," and a recent change that is expected to continue may be projected forward (ARM 37.62.108(3)). No particular method is required if it would not accurately reflect the parent's resources (ARM 37.62.108(4)).

If a parent has left customary self-employment or is earning less than the parent is qualified to earn, the imputed income rule may apply. See what counts as income for child support.

The Records to Gather

The guidelines require income to be documented and sworn to (ARM 37.62.108(1), (2)). For a self-employed parent that means:

individual income tax returns with all schedules, for up to the three most recent years;
the business entity's tax returns for the same years;
profit and loss statements for each year;
a depreciation schedule showing each asset's cost, date placed in service, and method; and
records separating business and personal use of vehicles, phones, and similar items.

The first three items come from ARM 37.62.108(3)(a). The last two are what it takes in practice to apply the depreciation and personal-use rules. The same documents are part of the financial disclosure both spouses owe in a divorce. See financial disclosure in a Montana divorce and discovery in a divorce.

Other Professionals You May Need

Translating a business's books into income for child support is partly an accounting exercise. A certified public accountant can prepare the straight line conversion and explain the returns. Valuing or dividing the business itself is a separate property question, covered in dividing a business in a divorce and, for agricultural operations, farms and ranches in divorce. A&M Law handles the family law side and does not provide tax or business law services.

For the steps that follow once income is set, see how child support is calculated.

This page explains Montana law in general as of the 2025 Montana Code Annotated and the current Montana Child Support Guidelines. It is not legal advice about your specific case.

Montana Divorce Guide Divorce Who Claims the Child on Taxes?Can Parents Agree to No Child Support?Child Support in Montana How Child Support Is Calculated

FAQ

Child Support When a Parent Is Self-Employed in Montana FAQ

How is child support calculated when a parent is self-employed?

The same guidelines apply. The difference is the income step: for a parent who is self-employed or has an ownership interest in a business, actual income is gross receipts minus reasonable and necessary expenses required for the production of income (ARM 37.62.105(2)(b)). Once that figure is set, the rest of the calculation is the same as for a wage earner.

Can business losses reduce child support?

A net loss in the operation of a business or farm may not offset other income. The exception is a parent with more than one business where the businesses are related, in which case total losses may be offset against total profits (ARM 37.62.105(2)(b)(iii)). Income for child support can never be less than zero (ARM 37.62.105(1)).

Is depreciation deductible for child support?

Straight line depreciation is, for vehicles, machinery, and other tangible assets required for the production of income. The Child Support Services Division's worksheet instructions say depreciation must be converted to straight line if accelerated depreciation or a Section 179 expense was claimed on the tax return and the straight line amount is lower.

How many years of tax returns are needed?

If a parent has been self-employed for three years or less, the profit and loss statements and income tax returns of both the parent and the business entity for each of those years are required. If more than three years, at least the most recent three years are required (ARM 37.62.108(3)(a)).

What if the self-employed parent does not produce records?

Income may be imputed to a parent who fails to produce sufficient proof of income (ARM 37.62.106(2)(c)), and a court may use a verified representation of income based on the best information available when a parent fails to provide financial information (MCA § 40-4-204(3)(a)). Formal discovery is also available in a court case.

Business Income in Your Support Case?

We can go through the returns and statements with you and explain how the guidelines treat them. Call 406-830-3060 for a confidential consultation.

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