Last updated on February 17th, 2026
You may have heard about the changes to the completed contract method under the One Big Beautiful Bill Act—but what do these changes mean for contractors?
The completed contract method (CCM) is an accounting method that enables construction companies to defer the recognition of income and expenses until a project is complete, allowing qualifying contractors to delay paying taxes on that income to a later year. In the past, this method of accounting was only available for smaller residential projects and contractors. However, due to changes to the tax law under the One Big Beautiful Bill Act, larger residential projects and contractors now also qualify for CCM. Here’s what you should know.
Methods of Accounting for Construction Projects
For some background, let’s take a look at the different methods of accounting used in construction. There are several methods, each with its own tax implications.
- Cash Basis Accounting: revenue is recognized at the time it is received, and expenses are recognized when they are paid.
- Accrual Basis Accounting: revenue is recognized as it is earned, and expenses are recognized when they are incurred.
- Percentage of Completion Method (POC): revenue and expenses are recognized based on the percentage of work completed during a certain period.
- Completed Contract Method (CCM): revenue and expenses are recognized only when a project is fully completed.
How have the CCM rules changed?
In short, the new tax law significantly expands allowable use of the completed contract method (CCM) for residential construction projects, opening this method up to more projects and contractors.
Prior to the OBBBA, the completed contract method was only available for small contractors and home construction contracts, applying to projects with four or fewer dwelling units. However, the OBBBA replaces the term “home construction contracts” in IRS Section 460 with the term “residential construction contracts.” This revision expands eligibility for the CCM to any residential construction contract where at least 80% of the costs relate to residential projects, regardless of the number of units or contractor size. As a result, larger projects containing more than four dwelling units—such as apartment buildings, condominium complexes, and residential care facilities—now also qualify for CCM.
No longer restricted to small contractors, the completed contract method is now also available to large contractors (exceeding the $31 million average annual gross receipts threshold) for qualifying residential projects. The OBBBA also extends the time period for qualifying construction contracts from two years to three years. Under the new rules, projects expected to be completed within three years can now qualify for the CCM.
Note: the CCM rules pertaining to commercial projects have not changed.
Should you use the completed contract method for your job?
The answer to this question varies depending on your situation and the particular job. The completed contract method allows you to defer paying income tax until a project is completed, providing additional cash flow for multi-year projects. However, lumping income together into a single year may result in a significantly higher tax burden for that year. We recommend meeting with your CPA to discuss the benefit of deferring taxes via the CCM versus spreading the tax burden over a longer period.
Reach out to our construction team at RBT CPAs for guidance related to the different methods of accounting for construction, and for all of your other accounting needs. We’re here to help you and your business succeed.