Construction companies are adapting to new tax benefits.
United States, August 12, 2025
The federal tax bill, known as the One Big Beautiful Bill Act, introduces significant tax reforms that benefit construction companies. Key updates include a 100% bonus depreciation for qualified property, a permanent Qualified Business Income deduction, and increased SALT deduction limits. These changes enhance cash flow and reduce tax liabilities, urging contractors to consult with tax advisors for optimal asset purchase strategies and compliance with new energy-related tax regulations.
The newly signed federal tax bill, known as the One Big Beautiful Bill Act (H.R. 1), brings significant changes to taxation that will directly impact construction firms across the country. Signed into law by President Trump on July 4, 2025, the legislation includes key provisions that will enhance cash flow and reduce tax liabilities for these businesses.
One of the most notable updates in the new tax law is the restoration and permanent increase of the bonus depreciation rate to 100%. This applies to qualified property acquired and placed in service after January 19, 2025. Previously, under the Tax Cuts and Jobs Act, the 100% bonus depreciation only applied to property placed in service from September 27, 2017, to December 31, 2022, and it featured a 20% phase-out thereafter.
With the current law, construction companies now benefit from the immediate expensing of new (and certain used) machinery, vehicles, and building improvements. This feature is crucial for firms looking to lower their taxable income in the year they make significant purchases.
To take maximum advantage of this legislation, construction companies are encouraged to plan their asset purchases strategically. Firms should align major purchases to coincide with the placement-in-service dates of 2025 or later to optimize their deduction timing and enhance cash flow.
The Qualified Business Income (QBI) deduction, outlined in Section 199A, has also been made permanent under the new bill. Eligible owners of S Corporations, partnerships, and sole proprietorships can now claim a deduction of up to 20% of their qualified business income. For owners earning below $394,600 (married) or $197,300 (single), full deductions are available, while phase-out ranges have been expanded to $75,000 (single) and $150,000 (married).
Another significant change is the increase in the federal deduction limit for state and local taxes, referred to as SALT. This cap has been raised from $10,000 to $40,000 for tax years through 2029, with indexing for inflation. This adjustment will offer substantial relief to construction firms operating across multiple states, helping those that previously exceeded the initial $10,000 cap.
Given these developments, contractors are advised to consult with tax advisors to evaluate their scenarios regarding SALT deductions and assess potential benefits that could arise from these legislative changes.
The new legislation also includes amendments to the Inflation Reduction Act of 2022 (IRA), which are set to take effect on July 4, 2026. These amendments will impose deadlines and restrictions affecting wind and solar facilities. Construction projects that start after specific deadlines may face limitations on eligibility for various tax credits.
Furthermore, there are new penalties for claiming unauthorized energy credits that arise due to violations related to foreign entity assistance. This highlights the importance for construction companies to remain compliant and up-to-date with the latest regulations.
Overall, the One Big Beautiful Bill Act marks a significant advancement for construction firms through its tax reforms. Companies should take proactive steps to adjust to these changes, particularly concerning asset purchase strategies and optimizing their business structures to fully leverage the benefits provided under the new law.
The One Big Beautiful Bill Act (H.R. 1) is a federal tax bill that was signed into law on July 4, 2025, introducing significant tax reforms aimed at benefiting construction companies.
The 100% bonus depreciation allows construction companies to immediately expense costs for qualified property and equipment acquired and placed in service after January 19, 2025. This can significantly reduce taxable income in the purchase year.
The federal deduction limit for state and local taxes has been increased from $10,000 to $40,000 through 2029, providing relief for construction firms that operate in multiple states.
The new legislation brings specific deadlines and restrictions affecting wind and solar facilities, which may limit eligibility for tax credits based on construction start dates.
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