Immediate expensing, overtime tax breaks and new SALT limits give owners more breathing room

Congress’s new One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, brings some of the most significant tax changes the construction industry has seen in years. This bill isn’t just about tax code—it could directly affect your cash flow, project financing and long-term succession plans.

Here’s what matters most for construction industry business owners:

Buy Equipment? Deduct It All in Year One

OBBB makes 100% bonus depreciation permanent. Contractors can now deduct the full cost of qualifying machinery, trucks and equipment in the year of purchase, retroactive to Jan. 19, 2025.

Example: If your company buys $500,000 worth of equipment in 2025, you deduct the entire amount right away. That’s stronger cash flow today and more flexibility for project funding.

Section 179 Expensing Limit Raised

The Section 179 limit is now $2.5 million, with the phase-out starting at $4 million.

Impact: Small and mid-sized firms can deduct most major purchases, equipment, vehicles and even software, without worrying about phasing out too quickly.

Incentives for U.S. Production Facilities

The bill adds a special depreciation rule for certain nonresidential real property used in U.S. production (like factories or refineries). To qualify, construction must begin between Jan. 19, 2025, and Dec. 31, 2028, and be in service by Jan. 1, 2031.

Why it matters: Contractors working on U.S.-based industrial projects benefit from immediate tax write-offs while also fueling growth in domestic manufacturing.

R&D Expenses: Deduct Immediately Again

From 2025–2029, domestic R&D expenses are deductible in the year incurred. Small firms (gross receipts under $31M) can even apply this retroactively to 2021.

Why it matters: Firms investing in better building methods, new technology or sustainable practices see quicker tax benefits and stronger cash flow.

Pass-Through Businesses Keep Their Break

The 20% Qualified Business Income (QBI) deduction is now permanent for S corporations, partnerships and sole proprietors.

Impact: This locks in lower federal tax rates for owners (around 29.6% instead of 37%), aligning with C corporation rates and giving pass-through firms long-term stability.

Bigger Interest Expense Deductions for Capital Projects

The deduction is now based on EBITDA (earnings before interest, taxes, depreciation, and amortization) instead of EBIT.

Plain English: If your firm borrows to buy equipment, finance real estate or fund growth, you can now deduct more of that interest expense.

SALT Deduction Relief (Through 2029)

The cap on state and local tax (SALT) deductions increases from $10,000 to $40,000 from 2025 through 2029, adjusted for inflation. Starting in 2030, it reverts back to $10,000. High-income taxpayers (MAGI above $500K) will see phaseouts, but never below $10K.

Impact: Business owners in high-tax states see meaningful short-term relief. Importantly, state pass-through entity tax (PTET) workarounds remain unaffected.

Green Energy Credits: Use Them Before They’re Gone

Two major incentives are ending sooner than expected:

  1. 179D deduction for energy-efficient commercial buildings.
  2. 45L credit for energy-efficient residential homes.

Deadline: Projects must begin before July 1, 2026 to qualify. After that, these credits are gone. Contractors, architects and developers should accelerate timelines now to capture these benefits.

Residential Builders Get New Tax Timing Options

Previously, only small projects (four units or fewer) could delay reporting income until completion. Now, larger residential projects also qualify, including:

  • Apartment buildings
  • Condominium complexes (including high-rise)
  • Townhouse developments
  • Student housing
  • Senior living and long-term care facilities
  • Mixed-use projects where the residential portion is the majority

Why it matters: A $25M apartment complex can now report income at completion rather than during construction, easing cash flow pressure. Specialty subcontractors may also qualify if 80% of their work is tied to eligible residential projects.

Overtime Pay Tax Deduction

Between 2025 and 2028, qualified overtime pay is exempt from federal income tax—up to $12,500 per worker ($25,000 for married couples).

Impact: Workers keep more of their pay, making it easier for you to staff up during peak demand.

Estate & Gift Tax Exemption Increased

Starting in 2026, the lifetime estate and gift tax exemption rises to $15M for individuals and $30M for couples, indexed for inflation.

Why it matters: Many construction firms are family-owned with most wealth tied up in the business. This higher exemption makes it easier to pass the company to the next generation without a forced sale.

Charitable Giving: New Minimum Floors

Charitable contributions are only deductible once they pass:

  • 0.5% of AGI for individuals
  • 1% of taxable income for C-corps

Impact: Smaller donations won’t reduce your taxes anymore. You’ll need to plan giving at or above these levels.

Next Steps for Construction Business Owners

The One Big Beautiful Bill isn’t just another tax tweak. It’s a blueprint that reshapes how construction firms handle taxes, financing and succession. Here’s where to start:

  1. Review your 2025 estimated tax payments now.
  2. Reevaluate your entity structure (S corp vs. C corp vs. partnership).
  3. Plan equipment purchases to take full advantage of bonus depreciation and Section 179.
  4. Move quickly on energy-efficient projects before the June 2026 deadline.
  5. Update succession and estate plans with the new exemption thresholds.

Bottom Line

The OBBB creates real opportunities for contractors to save money, ease cash flow strains and secure long-term growth. But in construction, as in tax planning, timing is everything. Act early to maximize these benefits before windows close.

Download the full tax guide to learn more.

 

Need help interpreting how these provisions apply to your situation? Contact an Adams Brown construction advisor for a personalized analysis of how the One Big Beautiful Bill could impact your business, your family and your future.