Last updated on November 13th, 2025
Signed into law in early July, the One Big Beautiful Bill Act (OBBBA) implements several new federal tax and spending policies and extends many policies previously set to expire. The nearly 900-page piece of legislation has significant impacts on businesses, individuals, and organizations throughout the U.S. Below are some of the provisions of the OBBBA most relevant to construction companies.
100% Bonus Depreciation Restored
The OBBBA permanently restores 100% bonus depreciation for qualified property placed in service as of January 19, 2025. This means that construction companies purchasing qualifying equipment or machinery can now once again fully deduct these purchases in the year they are placed into service, reducing taxable income and freeing up capital for other purposes.
Depreciation for Qualified Production Property
The OBBBA also introduces an elective first-year 100% depreciation deduction for “qualified production property,” that is, nonresidential real property used in manufacturing or production activities.
Section 179 Expansion
The Section 179 deduction allows businesses to deduct the full cost of qualifying equipment in the year it is placed into service. The OBBBA increases the Section 179 expensing limit to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million (new phasedown threshold).
Immediate R&D Deductions Restored
U.S. research and development expenditures, previously required to be amortized over five years, can now be deducted in the year paid. Small businesses averaging $31 million or less in annual gross receipts may elect to apply the change retroactively for tax years beginning after December 31, 2021. All businesses that made domestic R&D expenditures between 2022 and 2024 may elect to accelerate the remaining deductions for those expenditures over one or two years. Note that foreign R&D costs continue to require a 15‑year amortization. The restoration of immediate R&D deductions will allow construction companies to immediately deduct expenses related to domestic research and development, such as experimenting with new building techniques, technologies, and design processes.
Low-Income Housing Tax Credit (LIHTC) Expanded
The OBBBA permanently increases allocations for 9% LIHTC by 12%, and also permanently reduces the private activity bond financing requirement for 4% LIHTC from 50% to 25%, effective January 1, 2026. This expansion is expected to increase demand for affordable housing construction significantly.
Qualified Opportunity Zones and New Markets Tax Credit
The OBBBA makes the Opportunity Zones (OZ) tax incentive permanent, with several modifications, including a narrower definition of “low-income community” and expanded reporting requirements. The OBBBA also makes the Sec. 45D New Markets Tax Credit (NMTC) permanent. These provisions offer incentives for investment and construction in economically distressed communities.
Exception from Percentage-of-Completion Method
The OBBBA expands the exception from the percentage-of-completion method requirement to certain residential construction contracts.
QBI Deduction Extended
The OBBBA permanently extends the Qualified Business Income (QBI) deduction—which allows eligible taxpayers to deduct up to 20% of their qualified business income—with additional modifications.
Limitation on Business Interest
The OBBBA reinstates the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) limitation under Sec. 163(j), effective for tax years beginning after December 31, 2024. Adjusted taxable income (ATI) will be computed without regard to the deduction for depreciation, amortization, or depletion.
Removal of Clean Energy Incentives
The OBBBA terminates, phases out, or curtails many clean energy tax incentives, including the energy-efficient commercial buildings deduction (section 179D) and the new energy-efficient home credit (Section 45L). The removal of these incentives will require some construction firms to restructure their tax strategies.
“No Tax on Overtime”
The OBBBA creates a temporary deduction of up to $12,500 ($25,000 for joint returns) for individuals who receive qualified overtime compensation (as defined by the Fair Labor Standards Act), available for tax years 2025 through 2028. The deduction applies only to the premium portion of overtime pay (the amount paid in excess of the taxpayer’s regular rate of pay) and begins to phase out when the taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for joint filers). Note that the deduction applies only to federally required overtime under FLSA (Section 7), not to enhanced state overtime rules or those negotiated under collective bargaining agreements. The new deduction may incentivize construction employees to work more overtime hours, but will also require employers to update reporting and payroll systems.
Conclusion
For the most part, the new tax law has the potential to benefit construction companies by expanding various tax-saving opportunities, but it may also require you to restructure your business plan and update your reporting systems. Business owners should consider consulting with a tax professional to discuss how the OBBBA’s changes could impact your tax strategy.