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.
A significant change in federal tax law, the One Big Beautiful Bill Act (H.R. 1), has been enacted on July 4, 2025, providing crucial updates that will benefit construction companies across the country. Issued by President Trump, this new legislation promises to reshape the financial landscape for the construction sector by enhancing cash flow and reducing tax obligations.
One of the most notable changes in the new law is the restoration of bonus depreciation, which is now permanently set at 100% for qualified property acquired and placed in service after January 19, 2025. This is a substantial shift from the previous law under the Tax Cuts and Jobs Act, where 100% bonus depreciation was only applicable for property placed in service between September 27, 2017, and December 31, 2022. Following this period, a gradual phase-out began, reducing the benefit incrementally by 20% each year.
With this change, construction companies can instantly expense new machinery, vehicles, and certain building improvements, significantly lowering their taxable income in the year of purchase. This creates an opportunity for businesses to align major asset purchases with the placement-in-service dates from 2025 onward to maximize their tax benefits.
The Qualified Business Income (QBI) deduction, previously temporary, is now made permanent. This allows eligible owners of S Corporations, partnerships, and sole proprietorships to deduct up to 20% of their qualified business income. For owners with taxable income below $394,600 (married) or $197,300 (single), full deductions are available. The phase-out ranges have also been expanded, with new thresholds set at $75,000 for singles and $150,000 for married couples. These changes aim to provide substantial tax relief and stimulate growth for smaller construction-related businesses.
The new legislation has also increased the federal deduction limit for state and local taxes (SALT) from $10,000 to $40,000 for tax years through 2029. This change includes an indexing for inflation but is set to revert back to $10,000 starting in 2030. This increase is particularly advantageous for construction firms operating in multiple states that had previously surpassed the previous cap, thus enabling them to manage their tax liability more effectively.
Contractors are advised to consult with tax professionals to explore the best strategies to take advantage of SALT deduction changes and how the new guidelines can benefit their businesses.
The overarching goal of these tax reforms is to enhance cash flow and minimize tax liabilities for construction companies. Strategic actions, such as scheduling capital asset purchases according to the new regulations and optimizing business ownership structures, are essential for maximizing the benefits derived from this legislation.
In addition to the updates in tax provisions, recent amendments to the Inflation Reduction Act of 2022 include specific deadlines and restrictions affecting wind and solar facilities, effective from July 4, 2026. Construction businesses should be aware that projects initiated after certain deadlines could face eligibility limitations for various tax credits. Furthermore, new penalties for unauthorized claims on energy credits have been introduced, in response to violations regarding foreign entity participation.
The One Big Beautiful Bill Act (H.R. 1) is a federal tax law signed on July 4, 2025, which introduces significant tax changes for construction companies, including updates to bonus depreciation, QBI deduction, and SALT deductions.
Bonus depreciation has been permanently restored to 100% for qualified property placed in service after January 19, 2025. This allows construction firms to immediately expense capital assets, lowering their taxable income dramatically in the purchase year.
The permanent QBI deduction allows eligible construction business owners to deduct up to 20% of their qualified business income, significantly reducing their overall tax obligation.
Yes, there are new penalties for companies claiming unauthorized energy credits, with specific terms around foreign entity restrictions affecting various tax benefits.
| Feature | Description |
|---|---|
| Bonus Depreciation | Permanent 100% for properties post-January 19, 2025 |
| QBI Deduction | Permanently allows up to 20% deduction for qualifying business income |
| SALT Deduction Cap | Increased from $10,000 to $40,000 until 2029 with inflation indexing |
| New Penalties | Penalties on unauthorized claims for energy credits |
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