It’s been about a month since the One Big Beautiful Bill Act (OBBBA) became law. With the dust settling, construction business owners can start identifying the provisions that matter most to their bottom line. Here are six highlights to pay close attention to.
1. Accounting Method Flexibility
For tax years starting on or after July 4, 2025, residential construction contracts meeting the OBBBA’s updated definition may qualify for an exception to the percentage-of-completion method (PCM) of accounting. Eligible businesses can instead use the completed-contract method (CCM) or other approved methods. CCM allows income recognition when a project is substantially completed, often improving cash flow.
2. Accelerated Depreciation Benefits
The OBBBA expands opportunities to accelerate depreciation on qualified capital expenditures. The law:
- Makes 100% first-year bonus depreciation permanent for qualified new and used assets placed in service after January 19, 2025.
- Increases the Section 179 expense limit to $2.5 million, with a $4 million phaseout threshold, indexed annually for inflation.
- Creates a temporary 100% deduction for constructing “qualified production property,” such as material fabrication facilities, for projects started between January 19, 2025, and January 1, 2029 (in service by 2031).
3. Increased Business Interest Deductions
Beginning in the 2025 tax year, adjusted taxable income (ATI) will again include depreciation, amortization, and depletion in the calculation, reverting to an EBITDA standard. This change increases the base for calculating the business interest deduction, potentially allowing more interest expense to be deducted on financed purchases.
4. Incentives for Building in Distressed Communities
The OBBBA makes the qualified opportunity zone (QOZ) program permanent, enhances the low-income housing tax credit, and introduces a new rural opportunity fund option. These incentives aim to encourage investment in affordable housing and commercial development in distressed areas, creating potential new project opportunities for contractors.
5. Temporary Overtime Tax Deduction
From 2025 through 2028, employees can deduct up to $12,500 of qualified overtime pay ($25,000 for joint filers) regardless of itemizing. The deduction phases out for incomes above $150,000 (single) or $300,000 (joint). While payroll and state taxes still apply, the extra take-home pay may help construction firms attract and retain skilled labor.
6. Reduction of Clean Energy Tax Breaks
Several clean energy incentives from the Inflation Reduction Act are being rolled back, including:
- Sec. 179D energy-efficient commercial building deduction, ending for projects starting after June 30, 2026.
- Sec. 45L new energy-efficient home credit, ending for homes acquired after June 30, 2026.
This could impact planned sustainable building projects and related bids.
Navigating What’s Next
These are only some of the OBBBA provisions that could affect your construction company. Our team can help you analyze which changes apply to your operations and how to take advantage of available tax opportunities.
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