If you’re navigating a divorce or are already divorced, the new One Big Beautiful Bill (OBBB) Act introduces changes that could directly affect your financial arrangements—especially concerning child support and taxes. At West Coast Family Mediation, we’re committed to helping our clients stay informed about these changes so they can make thoughtful adjustments to their agreements when needed. Below are key updates under OBBB that may be applicable. Please note we always recommend talking with your tax advisor for specific tax advice.
1. Child Tax Credit Expansion
The child tax credit has been significantly expanded both in value and eligibility. The credit has been increased from $2,000 to $2,500 per child through 2028, starting with your 2025 tax return. The refundable portion (the amount you can receive even if you don’t owe taxes) increases to $1,700. The full Child Tax Credit is available if your modified adjusted gross income is $200,000 or below if you’re filing single or head of household, and $400,000 if you’re married filing jointly. The bill does include restrictions that could exclude some children in mixed-immigration-status families from receiving the credit, even if the children are U.S. citizens with Social Security Numbers.
For co-parents, this may mean:
- Higher credit amounts may provide additional relief for single-income or head-of-household individual’s post-divorce.
- The increased credit may affect how you negotiate claiming the credit year-to-year in your Marital Settlement Agreement (MSA) or Parenting Plan.
- Consider reviewing existing agreements about who claims children as dependents, as the higher credit value makes this more significant financially and could impact child support amounts.
2. SALT Deduction Cap Adjustment
From 2025–2029, the state and local tax (SALT) deduction cap will increase to $40,000 for taxpayers earning under $500,000 annually. After 2029, the cap will revert permanently back to $10,000. For families living in California, a state with fairly high state and local taxes, this may have a significant impact on families and will certainly affect child support calculations.
Impact on divorced families:
- This adjustment may temporarily reduce taxable income for middle-to-upper-income individuals, potentially affecting guideline support calculations and post-divorce budgets.
- Since this is a temporary provision (not permanent), any support modifications based on this change should clearly specify why the changes are being made and what the timeline for it may be.
- California residents who previously hit the $10,000 cap may see meaningful tax savings during this period
3. Other Tax Considerations
Standard deduction increases: The bill includes increases to standard deduction amounts, which may impact net income calculations used for spousal and child support determinations
- Marginal tax rate adjustments: Changes to tax brackets could affect take-home income and support calculations
- Permanent tax cut extensions: Many provisions from the 2017 Tax Cuts and Jobs Act are made permanent, providing more predictable tax planning for post-divorce financial arrangement.
How We Can Help
At West Coast Family Mediation, we believe that life after divorce should be as smooth and stable as possible. If these updates under the One Big Beautiful Bill Act impact your existing agreements, we’re here to:
- Review and update your Marital Settlement Agreement or Parenting Plan to reflect new tax realities.
- Facilitate post-judgment mediation sessions to address changes in support calculations due to tax law modifications.
- Help you and your co-parent understand how these tax changes might affect your financial arrangements, particularly around child tax credits and deduction strategies and to work with you and your tax professionals to determine what might be the best plan moving forward.
- Provide information on timing considerations, especially for temporary provisions like the SALT deduction increase
Important Disclaimer: Tax law changes are complex, and their impacts vary significantly based on individual circumstances. We strongly recommend consulting with a qualified tax professional to understand how these changes specifically affect your situation before making any modifications to existing support or custody agreements. As mentioned, we are happy to work directly with you and your tax professional to make sure that you get the necessary information before we make any modifications. And if you need a referral to a qualified tax professional to help, please let us know.