When the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, it introduced sweeping tax changes that are already reshaping the construction industry. The law contains many new factors important for contractors, developers and related businesses to carefully consider. When navigated correctly with the right support from a specialized construction CPA, businesses can find several benefits from the bill. 

Explore these key construction-related tax highlights from OBBBA: 

1. Depreciation Incentives: A Boost to Cash Flow

One of the most significant wins for construction firms is the permanent reinstatement of 100% bonus depreciation. Under OBBBA, qualifying property placed in service after Jan. 19, 2025, can be fully expensed in the year of purchase. This includes construction equipment, qualifying vehicles, land improvements and interior improvements to commercial buildings.

This accelerates tax deductions, improves cash flow and reduces taxable income. For example, a contractor investing $500,000 in new equipment can deduct the entire amount immediately, rather than spreading it over a five-year period. This is a game-changer for firms managing tight margins.

The OBBBA also raises the cap on Section 179 expensing, allowing businesses to immediately deduct $2.5 million of their qualifying property purchases, but this may be subject to limitations. This complements bonus depreciation and gives contractors flexibility in how they write off investments. This can be especially valuable for smaller firms when purchasing tools, machinery or office equipment.

Another key element is the Qualified Production Property (QPP), a new asset class created by the OBBBA that allows a 100% immediate deduction (effectively permanent 100% bonus depreciation) for certain production-related real property under new IRC §168(n). It is aimed primarily at U.S. manufacturers and similar producers constructing or acquiring qualifying facilities between 2025 and 2030. 

There are many caveats on what’s included in the QPP as well as specific timing restrictions, so it’s important to consult with your construction CPA before counting on deductions within QPP. 

2. Shrinking Landscape for Energy-Efficient Credits

OBBBA reduces many of the clean energy incentives expanded under the Inflation Reduction Act. Credits for solar power, wind power and electric vehicles are being phased out or eliminated. Key milestones include: 

• Clean vehicle credits are some of the most abrupt cut-offs, with most credits being repealed for vehicles acquired after Sept. 30, 2025.
• Most ‘green’ or energy efficient home and building credits run out by 2027, previously set for 2032.
• Technology-neutral clean electricity production and investment credits will begin to be phased out starting in 2033 and eliminated by 2036.

There are many specific dates for different credits with a few exceptions, so developers who relied on energy-efficient credits to offset costs for green building projects will need to reassess their financial models. Some targeted credits still exist, particularly for domestic manufacturing and certain energy security initiatives, but the broad-based incentives are gone.

3. Interest Deduction Limitations

The law modifies the rules around business interest expense deductions to base the limitation for applicable entities on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), as opposed to Earnings Before Interest and Taxes (EBIT). For construction firms financing large projects, this could affect how much interest is deductible each year, especially for highly leveraged developments. Firms should revisit financing structures to ensure they remain tax-efficient under the new rules.

4. Research and Development Credit Adjustments

While often associated with tech or manufacturing, the R&D credit is relevant to construction firms experimenting with new building materials, processes or energy-efficient designs. The OBBBA adjusts eligibility and calculation methods, potentially making it easier for mid-sized firms to qualify. This is an overlooked opportunity for contractors innovating in sustainable construction.

The credit calculation itself has not necessarily changed, but the ability to expense costs associated with OBBBA has. Pre-OBBBA, we had to capitalize domestic R&D (Sec. 174) costs and amortize over five years. Now, we can now expense in the year incurred, and there are options for companies to recoup the previously capitalized costs.

5. Domestic Production Incentives

Certain credits and deductions now favor U.S.-based manufacturing and construction supply chains. Contractors sourcing materials domestically may see cost advantages compared to those relying heavily on imports. This could influence bidding strategies and procurement decisions. While this is not related to tariffs, it does seem to be an effort to directly reward contractors using U.S-based operations.

6. Gain Deferral Opportunities in Qualified Opportunity Zones Extended and Modified 

Gain deferral in Qualified Opportunity Zones (QOZs) was effectively “re-set” by OBBBA into a rolling, five‑year deferral model and made permanent, which materially changes how construction-related Opportunity Zone (OZ) projects can be structured and timed. For contractors, developers and their investors, this translates into a more predictable, ongoing pipeline of tax‑motivated projects rather than a one‑time 2026 cliff.

OBBBA’s changes to OZs are expected to increase investor demand for development because the program now offers a predictable five‑year gain deferral and a permanent structure. This makes it more attractive to put QOF capital into real estate and infrastructure like multifamily, industrial and mixed‑use projects. 

At the same time, enhanced incentives for rural zones, such as larger basis step‑ups and a lower substantial improvement threshold, improves project economics. This means that developments like workforce housing, logistics facilities and civil infrastructure will become more financially viable in lower‑density areas.

7. Use of Completed Contract Method (CCM) for All Residential Contracts

This new rule lets contractors use the Completed Contract Method (CCM) for virtually all qualifying residential construction contracts, not just small home construction jobs with four or fewer units, which was the previous qualification. 

Starting with contracts that started in tax years beginning after July 4, 2025, this means larger projects like apartment complexes, condos, senior living, student housing and other multi‑unit residential developments can defer recognizing contract income and costs for tax purposes until the project is substantially complete. This provides more flexibility than reporting income each year under the percentage‑of‑completion method. This expansion can materially improve cash flow, reduce near‑term tax burdens and better align taxable income with when the contractor actually delivers and collects on the project.

With these changes, construction companies should revisit their capital strategies and project economics with these steps in mind: 

• Re-evaluate project timelines to maximize bonus depreciation benefits.
• Assess green investments carefully, since many credits are no longer available.
• Engage with specialized construction accountants early to ensure structures and financing align with the new law. This is also essential to ensure you take advantage of new tax credit possibilities. 

Preparing for These Changes

The OBBBA reshapes the tax landscape for construction firms, and there are many nuances to the bill likely to affect each business a little differently. Permanent 100% bonus depreciation provides a powerful incentive to invest in equipment and property, while the phase-out of energy credits requires a more cautious approach to sustainability initiatives. 

Reach out to our construction CPAs today, and we’ll navigate the best way forward for your business.