The Contractor’s One Big Beautiful Bill Cheat Sheet: Tax Provisions Impacting the Construction Sector

The passage of the One Big Beautiful Bill Act (OBBBA) offers tax planning opportunities for builders. To save busy contractors' time, our construction industry experts have laid out the bill’s key tax provisions. See what they mean for you so you don’t miss out on potential tax advantages.

1. Permanent 100% Bonus Depreciation

Contractors can now immediately deduct the full cost of qualifying assets (equipment, vehicles, software, etc.) acquired and placed in service on or after January 19, 2025. This applies to both new and used assets. This provision is now permanent, eliminating previous phaseouts.

Contractor Takeaway

You can get an immediate write-off on capital investments, improving your cash flow.

2. Expanded Section 179 Expensing

The maximum Section 179 deduction is now $2.5 million, and the phaseout threshold starts at $4 million. Both amounts are indexed for inflation. These changes are permanent. Contractors can choose between Section 179 (asset-by-asset election) and bonus depreciation (class-wide).

Contractor Takeaway

Being able to write off up to $2.5 million per year allows for strategic flexibility, particularly for businesses in states that do not conform with bonus depreciation.

3. 100% Deduction for Qualified Production Property (QPP)

A new 100% deduction applies to new nonresidential real estate property used primarily for manufacturing, production, or refining tangible personal property. To receive this deduction, construction must begin between January 19, 2025, and December 31, 2028, and placed in service before January 1, 2031.

Contractor Takeaway

This QPP deduction could benefit contractors building or upgrading their production facilities — and it’s a full deduction.

4. Immediate Expensing of Domestic R&D (Section 174A)

Domestic research and experimental expenditures can now be fully deducted in the year incurred rather than amortized — retroactive to tax years starting January 1, 2025. Small businesses (gross receipts ≤ $31M) can elect to amend returns from 2022–2024, while all businesses can deduct unamortized expenses as a catch-up deduction in 2025 or over 2025-2026.

Contractor Takeaway

There’s potential for refunds or catch-up deductions for innovative designs or builds coming out of R&D. Careful modeling may be required for small businesses to determine what option provides the best result.

5. Permanent 20% QBI Deduction for Pass-Throughs

The popular Qualified Business Income (QBI) deduction for pass-through entities (e.g., S corps, partnerships) is made permanent with the OBBBA’s enactment.

Contractor Takeaway

Contractors are not limited to a “specified services trade or business,” allowing them to fully benefit from a 20% deduction on eligible income, which lowers effective tax rates.

6. EBITDA-Based Interest Deduction

The interest expense deduction limit now allows adding back depreciation, amortization, and depletion when calculating adjusted taxable income (EBITDA), instead of earnings before interest and taxes (EBIT).

Contractor Takeaway

This boosts deductible interest, which is particularly beneficial for capital-intensive contractors.

7. Greater SALT Deduction Option

The state and local tax (SALT) deduction cap has increased to $40,000. This is increased annually by 1%, effective 2025–2029, and reverts to $10,000 in 2030. It also preserves the Pass-Through Entity Tax (PTET) workaround for high-tax states.

Contractor Takeaway

Between the increased SALT deduction cap and the PTET workaround, there’s more strategic planning flexibility for the construction industry under the OBBBA.

8. Expanded Revenue Recognition Options

The OBBBA broadens the exemption from the Percentage-of-Completion Method (PCM) to include multiunit residential contracts (e.g., condos, apartment complexes), to contractors of all sizes and is not limited to just small businesses (gross receipts ≤ $31M).

Contractor Takeaway

Builders have the choice to use the more favorable completed-contract method, enhancing deferral flexibility.

9. Overtime Income Deduction (2025–2028)

A temporary, above-the-line tax deduction is available for “qualified overtime compensation” — up to $12,500 for individuals or $25,000 for married couples filing jointly. It phases out at modified adjusted gross income (MAGI) thresholds of $150,000 (single) or $300,000 (joint). Employers must report overtime separately on W-2s.

Contractor Takeaway

These tax savings benefit labor-intensive operations, where overtime can be common. At the same time, it adds another layer of compliance for employers, as they are required to report the overtime separately.

10. Permanent Estate and Gift Tax Exemption Increase

Starting in 2026, the lifetime estate and gift tax exemption increases to $15 million per person and $30 million per married couple, indexed for inflation.

Contractor Takeaway

This is critical information for succession planning of family-owned construction businesses and supports intergenerational transfer of said companies.

11. Expanded 529 Accounts for Trades

The bill allows 529 savings accounts to be used for career and technical education in the skilled trades, like construction.

Contractor Takeaway

More funds for skilled trade students means a stronger pipeline to develop the construction workforce without as much education debt.

Summary: Construction-Specific Benefits of the One Big Beautiful Bill Act

Consider OBBBA Tax Savings Relevant to Your Construction Firm 

It’s worth looking into these key tax provisions — otherwise, you could be leaving money on the table. Our team is available to connect to make sure that you’re taking full advantage of tax savings for your contracting business.