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 recently enacted federal tax bill, known as the One Big Beautiful Bill Act (H.R. 1), signed into law by President Trump on July 4, 2025, brings substantial updates that will positively impact construction firms across the country. These changes primarily focus on bonus depreciation, the Qualified Business Income (QBI) deduction, and state and local tax (SALT) deductions.
One of the most noteworthy adjustments is the restoration of bonus depreciation, now permanently set at 100% for eligible property acquired and placed in service after January 19, 2025. This is a considerable enhancement compared to previous tax regulations established under the Tax Cuts and Jobs Act, which only allowed 100% bonus depreciation for properties in service from September 27, 2017, to December 31, 2022, followed by a 20% phase-out.
Construction companies stand to benefit immensely from the ability to immediately expense new (and certain used) machinery, vehicles, and building improvements. This capability allows firms to significantly lower their taxable income during the purchase year. Companies are encouraged to carefully time their major asset purchases to coincide with the placement-in-service dates of 2025 or later, optimizing potential deductions and enhancing financial liquidity.
The QBI deduction (Section 199A), which permits eligible owners of S Corporations, partnerships, and sole proprietorships to deduct up to 20% of their qualified business income, has been made permanent under the new legislation. Full deductions will continue for owners with taxable income below $394,600 for married individuals and $197,300 for single taxpayers. Additionally, the phase-out ranges have been expanded, allowing single taxpayers a phase-out up to $75,000 and married taxpayers up to $150,000.
Another significant enhancement is the increase of the federal deduction limit for state and local taxes (SALT) from $10,000 to $40,000 for tax years through 2029. This adjustment, which includes indexing for inflation, will revert to $10,000 starting in 2030. The expansion provides much-needed relief to construction firms operating in multiple states, often exceeding the original $10,000 cap.
Construction companies are strongly advised to consult tax advisors to explore various scenarios regarding the new SALT deductions, as well as to assess potential benefits from the updated legislation. Strategic planning regarding capital asset purchases and ownership structures can help firms enhance cash flow and minimize tax liabilities.
Amendments to the Inflation Reduction Act of 2022 have introduced specific deadlines and restrictions impacting wind and solar facilities, effective from July 4, 2026. Construction sectors planning to initiate projects after designated deadlines will face limitations on eligibility for various tax credits, specifically concerning assistance from certain foreign entities. Additionally, new penalties have come into play for claiming unauthorized energy credits, particularly related to violations involving foreign entities.
In conclusion, the One Big Beautiful Bill Act aims to bolster cash flow and decrease tax liabilities for construction companies through strategic planning and informed decision-making. By understanding and utilizing the new tax provisions, businesses can position themselves for enhanced financial performance over the coming years.
The One Big Beautiful Bill Act (H.R. 1) is a federal tax legislation signed into law that includes significant updates intended to benefit construction companies, focusing on areas like bonus depreciation, Qualified Business Income deductions, and state and local tax deductions.
Bonus depreciation is now set at 100% for qualified property placed in service after January 19, 2025, allowing construction firms to immediately expense new or certain used equipment, ultimately reducing their taxable income for the purchase year.
The QBI deduction is now a permanent feature, allowing owners of S Corporations, partnerships, and sole proprietorships to deduct up to 20% of qualified business income. Full deductions apply for those with taxable income below established thresholds.
The SALT deduction limit has increased from $10,000 to $40,000 for tax years through 2029, providing significant relief to construction firms operating across multiple states. The limit will revert to $10,000 starting in 2030.
Construction companies should consult tax advisors to strategically plan capital asset purchases and evaluate their tax situations under the new SALT deductions and other provisions to optimize benefits.
| Feature | Description |
|---|---|
| Bonus Depreciation | Set to 100% for property placed in service after January 19, 2025. |
| QBI Deduction | Permanent 20% deduction for eligible owners, with expanded income limits. |
| SALT Deduction Limit | Increased from $10,000 to $40,000 for tax years through 2029. |
| Tax Consultation | Importance emphasized for strategic tax planning and evaluating benefits. |
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