August 18, 2025
The One Big Beautiful Bill Act (OBBBA), signed into law earlier this year, contains provisions that will directly affect construction companies. It offers new ways to lower taxable income, improve cash flow, and invest in equipment and property. Some benefits are already in place, and others take effect in later years. A number of popular energy-related incentives have short deadlines, which means companies will need to act quickly to take advantage of them.
For construction leaders, knowing what is changing and when, can help with plans on equipment purchases, project bids, and staffing plans. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.
One of the biggest changes is the return of full bonus depreciation for qualifying assets. Beginning January 19, 2025, companies can deduct the entire cost of eligible equipment, vehicles, and similar property in the year it is placed in service. This applies to both new and used items with a recovery period of 20 years or less. Under previous law, the deduction was meant to drop to 40% in 2025 and disappear by 2027.
The law also increases the Section 179 deduction limit to $2.5 million, with the phase-out beginning at $4 million, starting in 2025. This is double the previous cap and offers more room for businesses to recover the cost of purchases like equipment, software, and qualifying building improvements. For many construction companies, this change will make it easier to invest in routine upgrades without waiting years for the full tax benefit.
Pass-through businesses will see another benefit through the Qualified Business Income (QBI) deduction, also known as Section 199A. The 20% QBI deduction is made permanent with this law, and income thresholds have been raised starting in 2026. The phase-out range will increase to $75,000 for single filers and $150,000 for joint filers, up from the current $50,000 and $100,000 limits. This will likely make it so more owners qualify.
R&D costs receive new treatment as well under Section 174. Beginning in 2025, qualifying domestic research and development (R&D) expenses can be deducted in full during the year incurred. This replaces the prior five-year amortization rule. Smaller companies, defined as those with average gross receipts of $31 million or less over the past three years, will also have the option to amend prior returns from 2022 through 2024 or take a one-time adjustment in 2025 or 2026. Larger companies are given the option to accelerate any remaining deductions starting in 2025. For construction businesses, this could apply to process improvements, materials testing, or other qualifying activities.
The OBBBA also adjusts how the limit on interest deductions is calculated. In recent years, the cap was calculated on an EBIT basis (earnings before interest and taxes). This excluded depreciation and amortization, which reduced the potential deduction. The new law goes back to the calculation that uses EBITDA (earnings before interest, taxes, depreciation, and amortization). This change may be especially helpful for construction companies that finance equipment purchases or take on debt for project work.
Another change is the creation of a Qualified Production Property deduction under Section 168(n). This allows 100% bonus depreciation for certain nonresidential construction activities in the areas of manufacturing and refining. Construction must start between January 19, 2025, and January 1, 2029, with the property in service before January 1, 2031. Renovations do not qualify. This may mean opportunities for contractors building industrial or manufacturing facilities for clients and for companies that construct and then operate qualifying production sites.
The law also extends the Opportunity Zone (OZ) program, which provides tax benefits for investments in certain low-income and rural areas. It’s been made permanent with several changes scheduled for 2027, including higher investor tax breaks, a new process for designating zones, and stricter rules. This is something to watch as a potential growth opportunity for contractors.
Beyond business changes, the law also includes a payroll-related benefit for individuals. From 2025 through 2028, overtime wages up to $12,500 per year for single filers and $25,000 for joint filers will be exempt from federal income tax, with phase-outs. This could help attract additional labor during busy periods. Companies will also need to check and possibly update payroll systems.
Not all incentives are being expanded. Some are being scaled back sooner than expected. Energy-efficient commercial building deductions under Section 179D will no longer be available for projects beginning after June 30, 2026. Production and investment credits under Sections 45Y and 48E will expire at the end of 2027. The electric vehicle charging credit under Section 30C ends June 30, 2026, and residential energy incentives under Sections 25C and 25D conclude at the end of 2025. Contractors involved in energy-efficient or renewable projects will need to time work carefully to meet these deadlines.
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The OBBBA introduces many tax-related changes for construction companies. By learning about the key provisions now, construction companies can plan ahead to compete more effectively in the years ahead. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.