On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law as Public Law 119-21. It contains the most consequential changes to construction tax planning in nearly a decade. Here are the five provisions every contractor needs to act on, with the exact deadlines that turn these changes into real money.

The bill made several Tax Cuts and Jobs Act provisions permanent, restored tools that had quietly phased away, and put hard sunset dates on others. For construction companies in the $1 million to $5 million revenue range, the planning window is now, and the difference between a contractor who acts and one who waits will show up in 2026 and 2027 tax bills.

This post walks through the five changes that matter most for general contractors, subcontractors, homebuilders, and commercial developers. Every figure is sourced to the IRS, the statute, or major CPA firm analysis. Sources are listed at the end.

1. 100 percent bonus depreciation is back, permanently.

Before OBBBA, bonus depreciation under IRC Section 168(k) was scheduled to phase down to 40 percent in 2025 and disappear entirely by 2027. The new law restored full 100 percent bonus depreciation and made it permanent for qualified property acquired and placed in service after January 19, 2025.

For a contractor, this means a $200,000 excavator, a $150,000 loader, or a fleet of new pickups can be deducted in full in the year they are placed in service, with no phase-down deadline pressuring the decision anymore. The catch is the placed-in-service requirement: the asset must be delivered, set up, and ready for productive use within the tax year, not merely purchased.

Strategy note

Permanent does not mean wait. Combined with the bonus depreciation election rules and the bonding capacity implications, the right contractors still benefit from staggering purchases across years. Tax strategy should still drive the timing.

2. Section 179 deduction more than doubled.

Section 179 lets you expense qualifying business property in the year of purchase rather than depreciate it over five or seven years. OBBBA raised the limits significantly:

Section 179 can be stacked with bonus depreciation. We typically use Section 179 first to absorb current-year taxable income (Section 179 cannot create a net operating loss), then apply bonus depreciation on any remaining basis. That sequence preserves the current-year cash flow benefit and avoids triggering an NOL that might raise audit attention or complicate a bonding application.

3. R&D expensing restored for construction innovation.

One of the most damaging changes of the original 2017 Tax Cuts and Jobs Act was the requirement, beginning in 2022, that domestic Section 174 research and experimental expenditures be capitalized and amortized over five years. For construction companies investing in process improvements, that meant deductions they had counted on were spread over many years instead of taken immediately.

OBBBA reversed this for tax years beginning after December 31, 2024. Domestic R&E is once again immediately deductible. For Atlanta contractors, qualifying R&D activities can include:

Even better, there is a retroactive catch-up provision. Firms with under $31 million in average gross receipts may apply the new rules retroactively to 2022, recovering deductions previously stretched over five years. Larger firms can elect to recover the capitalized 2022 through 2024 amounts over two years or all in year one. This is often the single biggest dollar item from the OBBBA for a growing contractor.

Retroactive opportunity

If you have a software development project, a prefab assembly trial, or a sustainable building technique you funded in 2022, 2023, or 2024, the full deduction may still be claimable. We routinely identify five and six figure recoveries from this provision.

4. Energy credits are sunsetting fast.

This is the most time-sensitive change in the bill. Two credits that homebuilders and commercial developers depend on are scheduled to end:

Section 45L (New Energy Efficient Home Credit)

Worth up to $5,000 per qualifying home for Zero Energy Ready homes ($2,500 for ENERGY STAR certified). Under OBBBA, the credit is not allowed for homes acquired after June 30, 2026.

Section 179D (Commercial Buildings Deduction)

Worth up to roughly $5 per square foot for energy-efficient commercial buildings. Under OBBBA, the deduction is not allowed if construction begins after June 30, 2026.

Critical Deadline: June 30, 2026

Homebuilders with green-certified inventory should plan closings before this date. Commercial contractors with energy-efficient designs should break ground before this date. After June 30, 2026, these credits stop generating new value.

5. Interest deduction and pass-through benefits, made permanent.

Section 163(j) Interest Limitation: EBITDA basis restored

Since 2022, the interest deduction limitation under Section 163(j) had been calculated on EBIT (earnings before interest and tax), which significantly restricted interest deductions for capital-intensive businesses. OBBBA restored the calculation to EBITDA (which adds back depreciation and amortization), permitting much larger interest deductions on equipment loans and project financing. For a contractor with a heavily depreciated equipment fleet financed with debt, this is a meaningful annual deduction recovery.

Section 199A QBI Deduction: Permanent

The 20 percent qualified business income deduction for pass-through entity owners was scheduled to expire at the end of 2025. OBBBA made it permanent. It also added a $400 minimum deduction for owners with at least $1,000 of active qualified business income and raised the phase-in thresholds. For S corporations, partnerships, and LLCs (which most contractors are), this preserves the planning around an effective top federal rate near 29.6 percent on pass-through earnings.

Bonus: A new tool for contractors who build manufacturing.

OBBBA created a brand new provision, IRC Section 168(n), that allows 100 percent immediate expensing of new nonresidential real property used for manufacturing, production, or refining activities. Translation: contractors who build factories, processing plants, or industrial facilities have a new tool to offer their owners.

The eligibility window is narrow:

If you build industrial or production facilities, this is a powerful sales tool when proposing projects to manufacturing-sector owners.

What to do between now and December 31.

The OBBBA is the most contractor-friendly tax law in years, but the value only shows up if it is acted on. Here is the practical checklist we are working through with every construction client:

None of these are theoretical. They are line items on a contractor's 2026 tax return that compound year after year. The cost of inaction is paid annually for as long as the provisions are on the books.

Sources