How the One Big Beautiful Bill Act Reshapes Construction Accounting and Tax Strategy

When the One Big Beautiful Bill Act (OBBBA) passed on July 4, 2025, it wasn’t just a headline-grabber. It instantly reshaped how construction companies manage tax planning, structure projects and make financial decisions. From accelerated depreciation rules to expanded residential deferral options, these new provisions go well beyond technical footnotes. They bring real, immediate impact to how contractors, developers and specialty trades plan for growth and cash flow.

And while some provisions are already retroactive to early 2025, others are coming fast in 2026. This means proactive tax planning is a necessity. We’ve detailed what construction companies should know now and what to ask your accounting team before Q3 closes.

Bonus depreciation and Section 179: Accelerated write-offs made permanent

For years, bonus depreciation has been a moving target. Construction leaders were used to budgeting around phase-down schedules and temporary thresholds. The OBBBA eliminates the guesswork, bringing long-term certainty to equipment planning and project budgeting.

What has changed?

• 100% bonus depreciation is now permanent. It applies to qualifying equipment and property placed in service starting Jan. 19, 2025.
• Section 179 expensing limit is increased to $2.5 million, with a phase-out starting at $4 million.

That means construction companies, especially those on the smaller end of the revenue spectrum, can write off the full cost of machinery, trucks and qualifying software in the year of purchase. And with no future phase-out planned, firms can plan capital investments with confidence instead of trying to beat the clock.

What qualifies under bonus depreciation and Section 179?

Construction businesses can now expense a broad range of items, including:

• Heavy equipment and machinery
• Company vehicles used for business
• Technology and jobsite software
• Office systems and qualifying leasehold improvements

This expansion is more than a tax perk. It’s a serious cash flow enhancer for firms investing in modernization or ramping up capacity. It also helps balance the books when new projects require large up-front spending.

In fact, businesses that were deferring purchases due to past uncertainty can now revisit their equipment strategy mid-year. If your firm placed qualifying assets in service after Jan. 19, you might be eligible for retroactive deductions on your 2025 return.

This is also a smart time to revisit your entity structure and long-term depreciation strategy, especially for pass-through entities that also benefit from the newly permanent Qualified Business Income deduction.

For more details on how depreciation strategies impact your taxable income, the IRS’s depreciation guidelines provide a full breakdown.

 

 

Residential contract deferral: Expanded exception from percentage-of-completion

If you develop or build multi-unit residential projects, the OBBBA has delivered one of the most meaningful tax reforms in recent memory. Historically, only home construction contracts involving buildings with four or fewer dwelling units could use the completed-contract method (CCM) to defer revenue. Larger residential projects were forced to recognize income as the job progressed using the percentage-of-completion method (PCM), regardless of whether they had been paid.

That changed with the OBBBA. Residential construction contracts involving more than four units, including high-rise condos, senior living and multifamily housing, can now qualify for deferral under CCM. This means no income recognition until the project is substantially complete.

Key highlights:

• The PCM exception now includes residential contracts for larger buildings, without a revenue cap or contract length limit.
• Contractors with average annual gross receipts under $31 million and projects expected to finish within three years also qualify, even if the work is not residential.
• Specialty subcontractors may qualify if at least 80% of their contract costs are tied to eligible residential projects.

Why this matters for your bottom line:

The expansion gives contractors more flexibility to align taxable income with real project cash flow. That’s especially valuable when payment terms are backloaded or tied to certificate-of-occupancy milestones. Instead of front-loading tax obligations on uncollected receivables, you can now plan around real-world billing schedules.

This also simplifies accounting by reducing the need for look-back adjustments and complex percentage tracking. For many construction firms working in the multifamily space, that means fewer headaches and less risk of compliance issues tied to mismatched income timing.

We recommend revisiting any new contracts you plan to enter before the end of the year. If they qualify under the updated rule and weren’t executed until after July 4, you could gain access to the new deferral benefit. For a full walkthrough of construction-specific tax planning opportunities, see our article on Construction Tax Planning: 10 Strategies for Year-End.

R&D and green credits: Deadlines are tighter, benefits are real

For construction firms using innovative methods, sustainable materials or proprietary tech, the OBBBA brings good news and a short window to act. The legislation restores the immediate deduction of domestic research and experimental (R&E) costs for 2025 through 2029. That reverses the costly capitalization requirement imposed by the Tax Cuts and Jobs Act in 2018.

At the same time, the law accelerates the sunset for two popular energy-related tax incentives:

• Section 179D (Energy Efficient Commercial Building Deduction) will terminate for projects that begin after June 30, 2026
• Section 45L (Energy Efficient Home Credit) also expires for projects starting after that date

Let’s talk about the details.

R&D deductions

• Construction companies can now fully deduct qualifying domestic R&E expenses in the year incurred
• Small businesses with under $31 million in average gross receipts may apply the rule retroactively to 2021 via amended returns
• Firms with capitalized R&E expenses from 2022 through 2024 can now elect to deduct the remainder over one or two years

This is particularly valuable for firms investing in prefabrication systems, modular technologies, safety-enhancing materials or productivity tools. If you have experimented with new processes or filed patents, you could already be eligible. For more on the R&D deduction and qualification criteria, the Tax Foundation provides a helpful breakdown. You can also check out our R&D Tax Credit Services page.

Green building credits under the clock

Both 179D and 45L have helped incentivize energy-efficient designs in commercial and residential construction. But under the OBBBA, time is limited. To claim these deductions or credits, construction must begin by June 30, 2026. That makes it critical to assess your project timelines now.

• Architects, engineers and design-build firms should act quickly to claim 179D on government and nonprofit projects
• Homebuilders pursuing the 45L credit should coordinate with energy modelers and certifiers to ensure documentation is complete before project kickoff

For both programs, the qualification process includes third-party certification and energy modeling.

Our recommendation: Do not assume you qualify! Document it from the start. And do not delay. Projects breaking ground after June 30, 2026, will miss the opportunity altogether.

Pass-through deductions and interest expense: Permanent clarity and capital relief

Construction companies that operate as S corporations, partnerships or sole proprietorships just received a welcome dose of tax certainty. The OBBBA makes the 20% Qualified Business Income (QBI) deduction permanent, removing the 2026 sunset that was built into prior law.

What this means for you:

• Owners of pass-through entities can continue to deduct up to 20% of their business income each year
• The effective top federal tax rate for qualifying income is reduced from 37% to 29.6%
• This preserves parity with the 21% corporate tax rate while maintaining the flexibility of a pass-through structure

For construction businesses with complex ownership or multistate operations, that kind of clarity is invaluable. There’s no longer a need to consider a structural overhaul just to manage a potential QBI phaseout.

 

 

Interest expense deduction rule also gets more generous

Previously, the deduction for business interest expense was limited to 30% of taxable income before interest and taxes. The OBBBA replaces that calculation with 30% of EBITDA, which adds back depreciation and amortization.

That change increases the allowable deduction for capital-intensive firms, especially those carrying significant debt for equipment, property or large-scale projects.

This adjustment is particularly beneficial for construction companies that use financing to manage seasonality or fund growth. With EBITDA-based thresholds, you can now deduct more of your interest expense, easing the tax burden in high-investment years.

It’s also a strong incentive to revisit project-based financing strategies, capital lease arrangements and your entity’s depreciation approach. These components now interact more directly with your annual tax position, so understanding the timing of income, interest and deductions is critical.

For a closer look at how tax planning intersects with debt strategy, visit our Business Tax Services page and talk with one of our construction specialists.

SALT deduction expansion, estate tax exemptions and new rules for charitable giving

Not every headline from the OBBBA is flashy. Some of the subtler changes offer key benefits for business owners and high earners, especially those working or investing in states with higher tax burdens.

SALT deduction cap increased to $40,000

For tax years 2025 through 2029, the cap on deducting state and local taxes (SALT) increases from $10,000 to $40,000. This change is especially impactful for construction company owners operating in high-tax states or using pass-through entity (PTE) tax elections.

• The $40,000 cap is indexed for inflation through 2029
• A phaseout applies to taxpayers with over $500,000 in modified adjusted gross income
• The deduction cannot fall below $10,000, preserving a baseline benefit for all taxpayers

Because the OBBBA did not limit or change the availability of PTE workarounds, many contractors may now deduct real estate taxes on personal residences or flow-through income that previously exceeded the cap.

Estate and gift tax exemptions increased to support succession planning

Beginning in 2026, the lifetime exemption for estate and gift taxes rises to:

• $15 million for single taxpayers
• $30 million for married couples

This change, adjusted for inflation, supports business owners looking to pass along ownership stakes without forcing heirs to sell off company assets. Many construction firms are held privately, with most of the value tied up in stock or real property. Higher exemption limits allow for smoother transitions and more strategic long-term planning.

Charitable deductions now subject to minimum floors

A new rule under the OBBBA introduces a floor on charitable contribution deductions:

• 0.5% of adjusted gross income (AGI) for individuals
• 1% of taxable income for C corporations

If a taxpayer does not meet the floor, none of their contributions are deductible. For example, an individual with $1 million in AGI must donate at least $5,000 before any of it qualifies as a deduction.

This rule tightens the requirements for claiming deductions and may require you to consolidate or time charitable giving more strategically.

To see how these changes could impact your year-end planning or estate strategy, consult with our team or visit the Urban Institute’s SALT deduction research for policy context.

Strategic tax planning under the OBBBA: What construction firms should do next

The One Big Beautiful Bill may have a catchy name, but its impacts are anything but cosmetic. With permanent bonus depreciation, expanded contract deferrals, restored R&D deductions and significant estate tax relief, this legislation rewrites the tax playbook for construction companies.

But these benefits are only valuable if you take the right steps at the right time. That means rethinking project timing, equipment purchases, financing terms and even your ownership structure. These provisions are active now, with more taking hold in 2026. Waiting to act may mean leaving money on the table or facing higher liabilities in future quarters.

At James Moore, we partner with construction companies to turn tax reform into tax advantage. We know the industry. We understand job cost accounting, multi-state operations and the challenges of managing cash across long build cycles. And we stay ahead of legislative changes so your planning always reflects the latest guidance.

If you have questions about how the OBBBA affects your construction firm or want help building a proactive tax strategy, contact a James Moore professional. Let’s work together to strengthen your business, protect your assets and take full advantage of the new tax environment.

 

 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.