How the One Big Beautiful Bill Impacts Construction Businesses

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The legislation includes more than 100 tax provisions and several regulatory updates affecting Denver construction businesses. The construction industry contributes over 4% of the U.S. GDP and employs more than 8 million workers, meaning that tax and regulatory changes can have wide-reaching implications. With key changes affecting provisions dealing with everything from bonus depreciation to the early expiration of many popular clean energy credits, strategic planning is becoming even more important for year-end. To help clients, prospects, and others, WhippleWood CPAs has summarized the key details below.

OBBBA Impact on Construction Companies

• 100% Bonus Depreciation Restored — Businesses can once again deduct the full cost of qualifying equipment, vehicles, and other assets in the year they are placed in service. The updated law applies to property put in service on or after January 19, 2025. Under prior rules, this deduction would have dropped to 40% for 2025 and phased out by 2027. Now, companies can fully expense both new and used property with a recovery period of 20 years or less. As an example, a contractor that places $600,000 of equipment in service in mid-2025 can deduct the full amount that year, instead of spreading the expense over multiple years. This is likely to improve short-term cash flow and give businesses more flexibility when planning investments.
• Section 179 — The law increases Section 179 deduction with a cap of $2.5 million and a phase-out beginning at $4 million. These limits apply to tax years beginning after December 31, 2024. Previously, the deduction was capped at $1.25 million with a phase-out starting at $3.13 million. Raising the cap may help more businesses recover costs, particularly for routine equipment needs.
• Qualified Business Income (QBI) — The 20% deduction for qualified business income is now permanent. Income thresholds have also increased. Starting in 2026, the income range for phase-outs will be raised to $75,000/$150,000 from $50,000/$100,000. This generally makes it easier for pass-through entities to qualify for the benefit. The IRS is expected to issue additional guidance before year-end.
• Section 174 R&D Costs — Starting in 2025, businesses can fully deduct qualifying research and experimentation expenses in the year they are incurred. This rule applies to domestic R&D activity only and replaces the prior five-year amortization requirement. The provision also includes a retroactive Businesses with average gross receipts of $31 million or less over the past three years can amend 2022–2024 returns or take a catch-up deduction in 2025 and 2026. Larger businesses aren’t permitted to amend prior returns, but they may accelerate any remaining amortization starting in 2025. Construction companies may benefit from conducting an R&D study.
• Interest Deductibility Limitations — The OBBBA updates how the limitation on business interest deductions is calculated. Under the Tax Cuts and Jobs Act (TCJA), interest deductions were capped at 30% of Adjusted Taxable Income (ATI). In recent years, ATI was defined as earnings before interest and taxes (EBIT), which excluded depreciation and amortization. The new law reverts the definition of ATI back to EBITDA, meaning companies can now include depreciation and amortization in the calculation. Construction businesses that rely on borrowing or equipment financing may want to revisit how these deductions are calculated.
• Qualified Production Property (QPP)  — IRC Section 168(n) is a new provision that allows 100% bonus depreciation for certain buildings used in manufacturing, refining, and similar activities. Construction must begin between January 19, 2025, and January 1, 2029. The building must be placed in service before January 1, 2031. Renovations are excluded. For construction companies, this may present an opportunity when working on ground-up industrial or manufacturing facilities. It can also apply to companies that construct and own qualifying production buildings, including those fabricating construction materials or prefabricated components.
• Clean Energy Tax Credits — Several clean energy tax credits are now scheduled to phase out earlier than expected. Section 179D, which applies to energy-efficient commercial buildings, will end for projects that begin after June 30, 2026. Production and investment credits under Sections 45Y and 48E are set to expire on December 31, 2027. The electric vehicle charging credit under Section 30C will end on June 30, 2026. Residential energy efficiency incentives under Sections 25C and 25D will expire on December 31, 2025.
• Overtime Pay — From 2025 through 2028, qualifying overtime wages are exempt from federal income tax. The benefit is capped at $12,500 per year for single filers and $25,000 for joint returns. It begins to phase out for individuals earning more than $150,000 and joint filers above $300,000. This could increase take-home pay for employees who regularly participate in overtime and help attract additional labor during peak periods. Construction companies will want to update payroll systems and communicate with everyone involved.
• Percentage Completion – Many constructions companies use the percentage completion method of recognizing revenue. Under the percentage completion method revenue is recognized based on the percentage of costs that have been incurred for a project. When a construction company that uses percentage completion claims bonus depreciation on an asset that is part of the cost of a project, the MACRS depreciation without bonus is used for the percentage of completion calculation. This change reduces the revenue that has to be recognized in the year of the bonus depreciation.

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The One Big Beautiful Bill includes changes that affect tax planning, payroll, and compliance across the construction sector. Consulting with a tax professional is recommended to optimize benefits and ensure compliance. If you have questions about the information outlined above or need assistance with another tax or accounting issue, WhippleWood CPAs can help. For additional information call 303-989-7600 or click here to contact us. We look forward to speaking with you soon.