The federal government shutdown may have seized the recent headlines, but before Washington came to a halt, Congress passed one substantial piece of legislation: H.R.1, the One Big Beautiful Bill Act (OBBB).
While not crafted with family law in mind, the OBBB amends enough tax rules that will inevitably affect divorce negotiations, child-related financial planning, and litigation strategy. Because these changes intersect with asset division, support, and long-term financial security, family law attorneys should be aware of the provisions most relevant to your cases.
(This summary is informational only and is not tax advice or family law advice.)
TCJA Changes Made Permanent—or Extended
Many of the tax rules we have grown accustomed to under the Tax Cuts and Jobs Act (TCJA) were temporary. The OBBB extends some and codifies others as permanent features of the tax code. This matters because several of these provisions directly influence negotiations involving support, dependency issues, and asset allocation.
SALT Deduction Cap: Higher Deduction May Influence Disposable Income
When someone pays state and local taxes (“SALT”), some of these payments can be deducted on federal tax returns. Previously, the deduction limit on SALT taxes was $10,000 for most tax payers. The OBBB increases that cap to $40,000 starting in 2025, with this cap to grow by 1% each year through 2029. For those folks paying significant SALT taxes each year, this is an impactful change.
Mortgage Interest Deduction: Implications for Home Buyouts & Refinancing
For homeowners who itemize their deductions, the mortgage interest deduction is commonplace. The TCJA temporarily increased the debt limit to $750,000, and the OBBB made that limit permanent. For divorced spouses, each spouse is eligible for the $750,000 debt limit. Furthermore, the OBBB made mortgage insurance premiums eligible for deduction starting in 2026.
New Vehicle Interest Deduction: May Affect Property Division
A completely new OBBB provision allows taxpayers to deduct up to $10,000 in interest on loans for new, personal-use vehicles purchased after December 31, 2024.
529 Plans: Expanded Uses Require More Detailed Settlement Language
Family law attorneys often encounter 529 Plans in settlement and trial preparation. The OBBB greatly expands the breadth of these accounts and the distribution cap. The new rules double the distribution cap from $10,000 to $20,000 per year per child. Furthermore, 529 Plan funds can now be used multiple non-tuition costs such as books, curriculum materials, standardized testing courses, workforce training programs, apprenticeships, and licensing programs.
Child Tax Credit: Permanent Increase Means Continued Negotiation Leverage
The TCJA increased the maximum Child Tax Credit to $2,000 per child but this increase was temporary. The OBBB increased this maximum to $2,200 and made this expansion permanent. However, to take advantage of this expanded Credit, the tax filer must have a Social Security number. Also, if separated spouses file separate tax returns, only one parent can claim a child(ren) in a given year.
Trump Accounts
A new tax-deferred savings vehicle, Trump Accounts, begins in mid-2026. Key features include:
$1,000 automatic government contribution for children born 1/1/2025–12/31/2028
$5,000 annual contribution limit
Tax-deferred growth, similar to an IRA
Penalty exceptions for education and first-time home purchases
Why these accounts matter for family law attorneys:
They will soon appear on financial disclosures and should be addressed in discovery.
Because they resemble retirement accounts in structure, they may fall into marital property in many jurisdictions.
The automatic $1,000 contribution for qualifying children may raise questions about characterization, management, and use.
Settlement agreements should specify ownership, contribution obligations, access permissions, and treatment in future withdrawals.
Given their novelty, courts may develop new case law around them—early practitioners should draft carefully.
Final Takeaway
The OBBB reshapes several tax provisions that directly influence the financial pieces of family law cases—from child-related tax credits to home financing deductions and education planning tools. Understanding these changes positions practitioners to better advise clients, negotiate informed settlements, and anticipate new financial documents and considerations appearing in future cases.
