ARTICLE | September 24, 2025

 

The recently passed One Big Beautiful Bill Act (OBBBA) delivers sweeping tax and economic incentives designed to fuel growth across industries—especially construction and real estate development. With permanent tax breaks, revised depreciation rules, and expanded credits, the law opens new doors for contractors and developers to enhance cash flow, invest in equipment, and structure long-term projects more strategically. While navigating these changes may seem complex, understanding the law’s key provisions can empower firms to capitalize on fresh opportunities and build with confidence.

Key Provisions Shaping the Construction Industry

Permanent 100% Bonus Depreciation and Section 179 Expansion

One of the most notable features of OBBBA is the permanent reinstatement of 100% bonus depreciation for property placed in service on or after a specific start date outlined in the legislation. This means construction businesses can fully expense qualifying investments immediately rather than depreciating them over many years. Items like heavy machinery, vehicles used in construction, and certain real estate improvements can all fall under this umbrella. Alongside bonus depreciation, the expansion of Section 179 is another powerful stimulus for contractors. Under OBBBA, the limits for Section 179 expensing have been increased, allowing small and mid-sized firms to take larger immediate deductions on eligible assets. Some thresholds and phase-out ranges have also been adjusted to reflect inflation and wider applicability. For construction businesses that frequently purchase tools, office technology, or other essential items, the capacity to deduct expenses in full within the same tax year can significantly enhance cash flow, which can then be reinvested back into the company. By aligning these rules more closely, businesses can plan large purchases, like equipment or software systems, with greater accuracy. This alignment reduces some of the confusion encountered in multi-year construction projects, where the timing of deductions can become tangled. For developers and contractors building on property they will hold a for investment, considerations for performance of cost segregation studies should be done as bonus depreciation is eligible on real property and personal property.

 Qualified Business Income (QBI) Deduction

Many construction companies operate as pass-through entities like S corporations, partnerships, or sole proprietorships. The permanence of the 20% QBI deduction means these businesses can continue benefiting from a substantial reduction in taxable income. While construction has historically fared well under the QBI framework, OBBBA cements many of these advantages, providing long-term certainty. The law does introduce or maintain certain income thresholds, so it’s wise to check that your operations to make sure there are no limitations to this deduction for your company.

Accelerated Depreciation for Factory Construction & Qualified Production Property

OBBBA includes provisions specifically aimed at stimulating manufacturing and industrial growth. Real estate developers will notice accelerated write-offs for newly built factories and other qualified production property, provided these facilities meet set criteria and are placed in service by certain deadlines. This presents an opportunity for contractors who specialize in constructing manufacturing plants or industrial complexes—investors are more likely to greenlight projects that offer immediate tax savings. Of course, purely administrative or office-related properties generally don’t qualify under this category, so careful documentation of building use is essential.

Opportunity Zones (OZ) Renewal and Expansion

Opportunity Zones have been a critical tool for funneling capital into low-income or underdeveloped areas. Under OBBBA, these designations continue, and in some versions, the policy might even become permanent. Stricter eligibility and reporting requirements may apply, but the underlying premise remains: deferral or even potential exclusion of capital gains in qualified projects. For real estate investors, this can translate into a robust pipeline of development work, especially in communities eager to harness new tax-advantaged investments. Whether engaged in commercial builds or mixed-use economic development, being proactive about locating and working within updated OZ boundaries can be a game-changer.

Expirations of Key Energy Provisions

While many new provisions were added, two key energy-efficiency incentives are ending June 30, 2026:

• 45L Credit: Up to $5,000 per unit for ENERGY STAR or Zero Energy Ready homes.
• 179D Deduction: Up to $5/sq ft for efficient lighting, HVAC, or envelope upgrades. Builders must act now to qualify before expiration.

 Simplified Account Methods for Residential Construction

A new provision under the OBBBA allows taxpayers to adopt simplified accounting methods for residential construction contracts, replacing the traditional percentage of completion method (PCM) and enabling significant deferral of revenue recognition. While similar to existing rules for homebuilders, the law now can extend to multifamily projects such as condominiums and apartments, starting with tax years after July 4, 2025. This change offers real estate developers and contractors the opportunity to improve cash flow and reduce taxable income during lengthy build cycles by switching to the completed-contract method or accrual method. However, businesses should carefully evaluate the transition, as opting out of long-term contract rules may trigger UNICAP requirements.

Potential Impacts on Cash Flow, Compliance, and Growth

Tax changes under the One Big Beautiful Bill Act (OBBBA) bring both exciting opportunities and added responsibilities for construction firms. Immediate expensing through bonus depreciation and Section 179 allows companies to quickly invest in equipment and technology while unlocking major early-year deductions—boosting cash flow and growth. The law also steers demand toward specific projects, like factory builds and Opportunity Zone developments, which could open new doors for contractors and developers. However, energy-efficiency incentives are shrinking, and updated rules around accounting and reporting mean businesses need to plan carefully to stay compliant and make the most of these benefits.

Strategies to Thrive Under the OBBBA 

To get the most out of the One Big Beautiful Bill Act (OBBBA), construction firms should focus on timing and structure. Planning major purchases—like equipment, property upgrades, or tech investments—around bonus depreciation and Section 179 limits can lead to big tax savings. Adjusting project timelines to capture R&D credits on new materials or digital tools is another smart move. It’s also important to review your business setup. With the 20% QBI deduction now permanent, pass-through entities can benefit—if they stay within income limits and avoid being classified as a “specified service” business. Solid accounting systems and contract methods help ensure multi-year projects are aligned with tax advantages. Lastly, keep an eye on updated Opportunity Zone rules. Local governments may offer extra incentives on top of federal ones, so staying informed about rural and new development zones can help you spot your next big opportunity.

How Larson Gross Can Help

OBBBA’s benefits involve more than single-click decisions. A thorough approach—encompassing not only tax compliance but also strategic growth and legacy planning—sets the stage for true success. At Larson Gross, our team works alongside construction professionals to help them capitalize on these new regulations while sidestepping possible pitfalls. Comprehensive Tax Planning: Our Individual & Business Tax Planning services dive into the practicalities of leveraging bonus depreciation, Section 179, QBI deductions, and R&D credits. We assist with modeling various scenarios, tackling multi-state complexities through our State and Local Tax knowledge when projects stretch across multiple jurisdictions. Larson Gross supports accurate financial reporting, ensuring consistency with the latest methods for long-term contracts, residential builds, and other specialized structures introduced by OBBBA. You’ll have clarity on how to record transactions and remain compliant throughout the project’s life cycle. Ownership Transition and Estate Planning: If you’re mapping out generational shifts or eyeing the sale of a construction business, changes in tax law affect those strategies, too. We provide Ownership Transition Planning and Estate Planning guidance to ensure that transitions happen smoothly and that the financial benefits of OBBBA pass on to the next generation or new ownership team. Wealth Management Support: For executives who want a holistic approach, our Wealth Management services, offered in collaboration with a trusted partner, integrate into your broader tax picture. This alignment helps maintain consistency across all facets of your financial life, from personal investments to the construction firm’s working capital.

Conclusion and Next Steps

Though new laws may initially seem like a maze of regulations and short-term deadlines, they can also represent long-term promise. The One Big Beautiful Bill Act creates an environment where real estate and construction companies have a golden chance to leverage immediate expensing, expand into new project types, and recruit and train a more qualified workforce. It also challenges them to incorporate new reporting standards, adapt to evolving incentive programs, and coordinate carefully across distinct project timelines. The firms that come out ahead will be those that recognize how their capital spending, workforce investments, project pipelines, and ownership paths fit together in a shifting environment. At Larson Gross, we stay at the forefront of these changes, equipping you with insights and strategies tailored to your unique business needs. Whenever you’re ready to discover how the OBBBA can enhance your cash flow, growth prospects, and long-term stability, we’re here to guide the way.

Larson Gross is here to walk you through these changes and help you make the most of them for your operation. Please contact us to learn more at 800-447-0177.