Key Changes for Construction Companies in The Big Beautiful Bill

By: Eric Vreeland, CPA, and Brent Ullrich, CPA

The One Big Beautiful Bill Act (OBBBA) brings significant tax and regulatory changes that will affect construction companies across the country. Signed July 4, 2025, this wide-ranging legislation may offer meaningful benefits for the construction industry. Here are some highlights of how the bill may impact your company as you navigate the years ahead.

Residential Exception to the POC Method 

Under prior law, only home construction contracts (which were narrowly defined) were eligible to use the completed contract method (“CCM”). 

However, in tax years beginning after July 4^th, 2025 (i.e., calendar year 2026 for most), all “residential construction contracts” are now eligible for CCM. The expanded availability of the CCM should allow contractors, large and small, to recognize income only after substantial completion of the project, generally deferring taxable income in the process. Applicable “residential” projects may include (but are not limited to) condominiums, apartment complexes, long-term care facilities, senior living facilities and more. 

The Return of 100% Bonus Depreciation

One of the most notable features of the OBBBA is the reinstatement of 100% bonus depreciation for qualifying property placed in service after January 19, 2025. This provision allows construction companies to fully expense the cost of equipment, vehicles and certain types of improvements in the year they are placed in service.

More Generous Section 179 Expensing Rules

Another key feature of OBBBA is its expanded Section 179 deduction cap. You can take an immediate deduction of up to $2.5 million for qualifying business expenditures, with a phase-out threshold of $4 million. Both figures are set to increase in future years, along with inflation. Combine the bigger Section 179 deduction with 100% bonus depreciation for maximum value and flexibility. 

Full Deductibility for Qualified Production Property 

A brand-new, 100% deduction for Qualified Production Property should offer a big boost for companies with qualifying real property. The deduction applies to new construction (beginning after January 19, 2025) used primarily for producing, manufacturing or refining tangible personal property. Property used for sales, research, engineering, software development, lodging, parking or administrative services is not eligible for the deduction. 

EBITDA-based Business Interest Deduction

If the strict limitations on business interest deductions in place since 2022 have hurt your financial picture, take heart: You can once again deduct business interest under the previous EBITDA-based limits rather than the more recent rules that excluded depreciation, amortization and depletion from the calculations. The new rule applies to years beginning on or after January 1, 2025. 

Immediate R&D Expensing

Immediate expensing for domestic R&D activities is back. Most companies will be able to “recoup” (i.e., deduct) previously capitalized domestic R&D in 2025 and/or 2026. Companies with $31 million or less in average gross receipts (for the prior three years) also have the option to claim R&D deductions for previously capitalized costs and possible related refunds for prior years (via amended returns). 

Talk with your advisor to determine the best way to take advantage of this relief from rules that many companies found financially burdensome. Foreign R&D is still subject to capitalization and amortization rules previously in place.

Accelerated Phaseout of Inflation Reduction Act (“IRA”) Tax Credits 

OBBBA ends many of the clean energy and efficiency-focused tax credits in the Inflation Reduction Act ahead of schedule, which increases pressure on construction companies, particularly those involved in current or planned solar and wind projects.

The residential solar tax credit will expire on December 31, 2025; these projects must be fully installed and operational by that date to qualify for the credit. Commercial solar and wind projects must be operational by the end of 2027, with construction starting by July 4, 2026. 

Other Important Considerations

Additional features of OBBBA could alter the financial equation for construction companies — and their owners: 

• A permanently expanded estate and gift tax exemption allows up to $15 million per individual and $30 million per married couple in lifetime tax-free estate, gift and generation-skipping wealth transfers. 
• Permanent Opportunity Zone tax incentives expand compliance and reporting obligations, but could increase demand for construction projects in designated areas. 
• PTET (SALT) Deductibility Preserved and (199A) QBI deduction made permanent. The OBBBA preserves the federal deduction for state and local taxes paid through elective Pass-Through Entity Tax (PTET) regimes as well as makes permanent the 20% Qualified business income deduction for “pass-through” taxpayers (S Corporations and partnerships).

While many OBBBA provisions are largely positive for the construction sector, it is important to bear in mind current issues that could increase risk or expense for the construction sector.

• Shifting trade policies. If you’re considering significant capital investment or other changes to your business, factor the potential for higher tariffs into your financial projections. Depending on the outcome of ongoing tariff negotiations, you could face higher costs for materials and equipment originating in other countries.
• Labor Market & Workforce. Shifting labor dynamics, particularly within the construction sector, may impact the availability and cost of labor for upcoming projects. It is important to factor these potential challenges into your project planning.

Capture the Benefits of OBBBA

OBBBA is a massive piece of legislation that reshapes the playing field for almost every industry, including construction, and with the change comes opportunity. Your Mauldin & Jenkins advisor can help you analyze what the bill means for your business, and make a strategic plan to maximize its benefits.