As tax season approaches for 2025 (returns filed in spring 2026), it’s critical for financial professionals and divorce planners to recognize how the new One Big Beautiful Bill Act (OBBBA) —signed into law on July 4, 2025—alters the tax landscape for individuals and families.
This post highlights ten key provisions that could impact your clients’ after‑tax cash flow in 2025 and explain how those provisions will be implemented in Family Law Software when the tax update is released. (We will send an email to all subscribers at that time.)
A future post will cover changes effective in 2026 and beyond.
1. Extension of Prior Tax Rates and Brackets
A bill passed in the first Trump administration reduced tax rates, effective in 2018, especially at the top end. These reductions were scheduled to revert to pre-2018 law starting in 2026.
OBBBA makes the lower rates permanent. This is not effective in 2025, but it is a central component of the new bill, and it is worth considering for your 2026 planning.
In addition, other provisions that simply make the 2017 act changes permanent are already factored into the 2025 cash flow.
When the update for the act is released in Family Law Software the software will incorporate the new rates and anticipate adjustments for inflation in the future.
2. Standard Deduction
In 2025, the standard deduction is increased to $15,750 (single), $23,625 (head of household), and $31,500 (married filing jointly).
It will continue to be adjusted annually for inflation.
Family Law Software will incorporate the new standard deduction and anticipate inflation adjustments.
3. Child Tax Credit
The bill permanently increases the nonrefundable child tax credit from $1,000 (as it was in 2017) to $2,000.
With an inflation adjustment, it will be $2,200 in 2025.
And the level will be inflation-adjusted going forward.
The bill also makes permanent the refundable child tax credit of $1,400, which, adjusted for inflation, will be $1,700 in 2025.
It also makes permanent the increased income phase-out threshold amounts of $200,000 ($400,000 in the case of a joint return). That means that taxpayers with higher incomes continue to be more likely to qualify for the credit than they were in 2017.
And it makes permanent the $500 nonrefundable credit for each dependent of the taxpayer other than a qualifying child (such as a disabled child who remains a dependent past age 18).
Family Law Software will calculate the new credit and phase outs, and it will anticipate inflation adjustments.
4. State and Local Tax Deductions
There is a limitation on the amount of combined state and local tax deductions that may be deducted. (They are an itemized deduction.) This limitation is known colloquially as the “SALT cap.”
Currently, the SALT cap is $10,000 ($5,000 if married filing separately).
For 2025, OBBBA raises the SALT cap to $40,000 (or $20,000 married filing separately).
The cap will increase by 1% per year, but only from 2026 through 2029.
After that, the cap will revert to $10,000 and $5,000.
Prior to 2030, the cap is subject to a gradual phaseout for taxpayers with incomes above $500,000 ($250,000 if married filing separately). These thresholds are adjusted for inflation. The rate of phase-out is 30% of the income over the threshold. But the phaseout will not reduce the limit below $10,000 ($5,000 if married filing separately).
Family Law Software will calculate the SALT cap each year, and for projections it will automatically revert the SALT cap starting in 2030.
5. No Tax on Tips
OBBBA introduces a new provision allowing taxpayers who earn tips to deduct up to $25,000 of qualified tip income.
This deduction is available whether or not the taxpayer itemizes their deductions.
If the taxpayer is married, they must file a joint return to be eligible.
This provision is available only in 2025 through 2028.
But this deduction may be available to fewer people than one would initially expect.
There are limitations to prevent people from cheating. For example, the work can only be in an occupation that traditionally received tips before the bill was passed.
The Treasury has released a list of jobs that qualify. It includes wait staff, repair people, people who work in casinos, event staff, personal care and fitness staff, bellhops, doormen, valet and other vehicle attendants, and others.
The person must be an employee (not an independent operator).
Also, the employer must report the tips to the IRS and to the employee, which will prevent some people from taking advantage of the provision.
And the person must have a Social Security number, which may prevent other tipped employees from taking advantage of this section.
Also, there are income limitations. If the taxpayer’s adjusted gross income (all income, not just tip income) exceeds $150,000 ($300,000 for joint filers), the deduction starts phasing out at a rate of $100 for each $1,000 of income over the threshold.
Family Law Software will have an option to specify the amount of tips that qualify for the deduction, and it will figure out the phase-out for you, if it applies. For projections, it will automatically eliminate this deduction starting in 2029.
6. No Tax on Overtime
OBBBA establishes a new dollar-for-dollar deduction corresponding to the first $12,500 (or $25,000 married filing jointly) of overtime pay, but only in 2025 through 2028.
This deduction is available whether or not the taxpayer itemizes their deductions.
Again, it is available only if the employer reports the overtime to the employee and to the IRS.
As with the deduction for tips, the deduction starts phasing out if the taxpayer’s modified adjusted gross income — the same as adjusted gross income in most cases – exceeds $150,000. The phase-out rate is $100 for each $1,000 of income over the threshold.
If the taxpayer is married, they must file a joint return to be eligible.
There is a certain amount of reporting and paperwork which will tend to discourage the applicability of this benefit in practice.
Family Law Software will automatically apply this deduction to all overtime during the relevant years. For projections beyond 2028, the deduction will not apply.
7. Automobile Loan Interest Deduction
OBBBA creates a new deduction of up to $10,000 of interest on loans taken out for U.S.-assembled vehicles.
The deduction is available only for 2025 through 2028.
The deduction starts phasing out if AGI is over $100,000 ($200,000 if filing jointly), at a rate of 20% of income above the threshold.
Family Law Software will have a checkbox for debts to let you specify that this is a qualifying automobile loan. It will then automatically calculate the deduction for interest on that loan. For projections, this deduction will not apply after 2028.
8. Tax Deduction for people age 65 or older
Taxpayers aged 65 or older at year end may claim a “senior deduction” of up to $6,000 ($12,000 if married filing jointly).
This deduction is available whether or not the taxpayer itemizes their deductions.
This deduction is effective in 2025 through 2028.
Phase‑outs apply starting at $75,000 (single) and $150,000 (joint) modified adjusted gross income at a rate of 6% of income above the threshold.
Family Law Software will automatically calculate this deduction, if it applies, based on your entry of the parties’ birth dates.
9. Section 179 Expensing.
For Section 179 property (qualified business property), you may now deduct 100% of the cost of the property in the year of purchase, if it is purchased after January 19, 2025.
The act also increased the dollar limitation under Sec 179 for expensing business assets from $1 million to $2.5 million.
This provision is not scheduled to expire.
In Family Law Software, you would enter this as a business expense.
10. Business pass-through (QBI) deduction.
The 2017 tax act added a new deduction benefitting business owners, which became known as the Qualified Business Income (“QBI”) deduction.
This was scheduled to expire in 2026.
The 2025 tax act extends that provision indefinitely.
In addition, effective in 2026 it adds a new minimum QBI deduction of $400 for people whose qualified business income exceeds $1,000. Family Law Software will automatically calculate the new minimum credit.
Family Law Software is the most comprehensive and accurate solution available for family law practitioners. Our team continuously monitors and incorporates changes in laws and tax codes to ensure accuracy and reliability for all users. All Family Law Software users now have access to our cloud portal providing on demand access to the most current version of our software.
Firms utilizing the desktop version must install the latest update to access recent enhancements. For assistance with updates or to transition your team to the cloud platform, please contact our support team.
Helpful Resources:
Contact Us: Family Law Software: https://site.familylawsoftware.com/contact/
New File Manager Blog: https://www.familylawsoftware.com/new-file-manager/
Getting Started with Family Law Software Cloud video: https://www.youtube.com/watch?v=DuXZ1GFvAOU
