Understanding Potential Impacts of the One Big Beautiful Bill Act on the Construction Industry 

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. [1] This blog discusses anticipated impacts of the new law on the construction industry, including those affecting taxation, ongoing and future projects, and the construction workforce. It also highlights steps that construction professionals should consider taking in response to the changed laws.

Tax Impacts 

The OBBBA makes significant changes to tax laws and incentive programs, which are anticipated to directly impact the construction industry. 

Bonus Depreciation

The OBBBA makes 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025 permanent. This allows construction professionals to write off the full cost of eligible assets (such as new and used equipment) in the year they are placed in service.

Section 179 Expensing

Section 179 of the Internal Revenue Code (IRC) allows businesses to write off the full value of eligible assets (such as equipment and software) in the same year they are purchased and placed in service even if they are financed subject to an expensing limit and phase-down thresholds. The OBBBA significantly increases the expensing limit and phase-down threshold for property placed in service after December 31, 2024. These amounts are subject to adjustments for inflation and are anticipated to improve cash flow, especially for small and medium-sized businesses by allowing additional write-offs for equipment and software.

R&D Expensing

The OBBBA permanently extends 100% expensing for domestic research and development (R&D) expenditures allowed under Section 174 of the IRC. Thus, construction professionals may be able to write off the cost of new and used equipment and technologies like drones and Building Information Modeling (BIM) systems in the year purchased.

Percentage of Completion (PCM) Accounting Exemption

Section 460 of the IRC requires contractors to use the PCM accounting method; but, some construction projects are exempt from this requirement and may use simplified accounting methods instead. The OBBBA expands these exemptions to include residential construction contracts, including multi-family housing. This change may offer several tax advantages for construction businesses, including improved cash flow management.

Overtime Deduction

The OBBBA creates a new temporary income tax deduction for eligible overtime pay. For tax years 2025 through 2028, an individual taxpayer can deduct up to $12,500 (or $25,000 if filing jointly) of qualified overtime pay. The deduction phases out for single filers with a modified adjusted gross income (MAGI) over $150,000 (or $300,000 for joint filers). For every $1,000 earned above those thresholds, the deduction drops by $100. The deduction is completely phased out if a single filer makes $275,000 (or $550,000 for joint filers). As a result, it is important for employers to have payroll systems in place that accurately track overtime separately so that it can be reported to the federal government and employees may claim the deduction.

Depreciation and Amortization

The OBBBA makes three notable changes to Section 163(j) of the IRC. It permanently excludes depreciation and amortization of the taxpayer’s adjusted taxable income (ATI), excludes controlled foreign corporations inclusions from ATI, and changes the treatment of capitalized interest expenditures. The ability to include depreciation and amortization in calculating ATI may benefit some construction companies.

 Pass-Through Entities

The OBBBA makes several tax changes applicable to pass-through entities such as partnerships, sole proprietorships, certain limited liability companies, and S-Corp shareholders which are frequently utilized in the construction industry.

• Individual Tax Rate. The OBBBA permanently extends individual tax rates set under the 2017 Tax Cuts and Jobs Act (TCJA) which were originally set to expire and increase at the end of 2025.
• Estate Tax. Under the TCJA, Congress increased the federal estate and gift tax exemption to an amount nearly double the prior exemption amount. Adjusted each year for inflation thereafter, the exemption in 2025 is $13.99 million for individual filers and $27.98 million for joint filers. However, the increased exemption was set to expire at the end of 2025. The OBBBA increases the exemption to $15 million for individuals and $30 million for joint filers starting in 2026 and makes the exemption permanent. The exemption will continue to be adjusted for inflation each year. This change may help family-owned construction companies with succession planning.
• Excess Business Losses. Section 461(l) of the IRC imposes a limitation on the deduction of excess business losses. Excess business losses occur when a business’s total deductions surpass its total business income subject to a specific threshold. In 2025, the thresholds are $313,000 for single filers and $626,000 for joint filers. This rule was set to expire in 2028, but the OBBBA makes the rule permanent. The OBBBA also changes the law in that the loss exceeding the threshold in one year is now added into the next year’s calculations, potentially compounding the limitation in future years.
• Qualified Business Income Deduction. Section 199A of the IRC lets eligible self-employed individuals and individuals who own pass-through entities deduct up to 20% of their qualified business income (QBI). Originally set to phase out in 2025, the OBBBA makes the QBI deduction permanent.
• SALT Deduction. Under Section 164(a) of the IRC, individuals with pass-through entities who itemize their deductions are allowed to deduct certain state and local taxes (SALT) that they have already paid. In 2017, Congress limited the itemized SALT deduction to $10,000 (or $5,000 if married filing separately). The OBBBA increases those amounts to $40,000 (or $20,000 if married filing separately) in 2025. From 2025 through 2029, the cap will increase 1% per year. In 2030, the cap will revert to $10,000 (or $5,000 if married filing separately). There are restrictions applicable to high earners. The deduction phases out for those whose MAGI is over $500,000 in 2025. That threshold is set to increase 1% each year after 2025. In addition, the deduction is reduced by 30% of the excess income above the threshold.

Clean Energy Tax Incentives and Credits

 The OBBBA phases-out or eliminates numerous clean energy tax incentives and credits created under the Inflation Reduction Act of 2022 (IRA) and may affect existing and future construction projects related to renewable energy facilities and upgrades.

• Sections 25C & 25D. Homeowner tax credits related to the installation of renewable energy systems such as solar or geothermal heat pumps are being terminated after 2025. To realize the tax credit in 2025, homeowners must install and place renewable energy systems into service on or before December 31, 2025.
• Section 30C. Tax credits for building alternative vehicle fueling infrastructure are being phased out in 2026. Alternative vehicle fueling infrastructure must now be placed into service by June 30, 2026 to receive a tax credit.
• Section 45L. Tax credits for the construction of energy efficient homes are being phased out early. Units must now be sold or leased by June 30, 2026 to be eligible for the tax credits.
• Section 45V. Tax credits related to the construction of clean hydrogen facilities are being terminated early. Only projects started before January 1, 2028 will now be eligible for tax savings.
• Sections 45Y and 48E. Tax credits for wind and solar (but not other technologies) are being phased out on an accelerated timeline. To be eligible for tax credits after enactment of the OBBBA, wind and solar projects must be started before July 4, 2026 or be completed and operational by December 31, 2027. In addition, zero-emissions technologies such as hydropower and nuclear energy are now eligible for the credit through 2033, with a phasedown in 2034 and 2035.

 Section 179D

For owners to take advantage of tax credits for energy efficiency improvements to commercial buildings, they must now start construction on those projects no later than June 30, 2026.

Low-Carbon Construction Materials

The OBBBA rescinds funding to certain programs related to low-carbon construction materials.

Project Impacts  

The OBBBA is likely to increase the availability of certain types of construction projects while reducing others. 

Border Wall Construction

According to the House Committee on Homeland Security, the “OBBBA allocates more than $46 billion to construct and finish the border barrier system, including 701 miles of primary wall, 900 miles of river barriers and 629 miles of secondary barriers, and replace 141 miles of vehicle and pedestrian barriers.”[2] As a result, it is anticipated that there will be new opportunities for construction professionals to secure work along the country’s southwest border.

Multifamily Building Construction

Given the changes discussed above concerning bonus depreciation, expansion of the PCM to cover multifamily residential projects, and the Section 179 expense limit increase, as well as, the ongoing need for affordable housing in many communities, it is anticipated that multifamily building construction projects will increase.

Opportunity Zone Projects

In 2017, the TJCA created the Opportunity Zone program to incentivize long-term private investment in real estate projects and businesses in designated low-income communities. Opportunity Zone investors receive tax incentives that defer and/or eliminate state and federal capital gains taxes. The program was set to expire in 2028. The OBBBA makes the program permanent. It also increases incentives for investors and developers and creates a new category of funds for rural areas. These changes may result in new affordable housing and commercial development projects in Opportunity Zones.

Manufacturing Projects

The OBBBA creates a new tax incentive for Qualified Production Property (QPP) which allows manufacturers to deduct 100% of the cost of real property used in manufacturing activities. This change together with the 100% bonus depreciation discussed above, may encourage and increase manufacturing and infrastructure construction.

Renewable Energy Construction

With the phasing out and elimination of clean energy tax credits and incentives as discussed above, renewable energy project opportunities may be available in the short term but are expected to decline over time.

Workforce Impacts 

The OBBBA is expected to have an impact on the construction industry workforce in a variety of ways—some may increase the availability of certain workers, and others may exacerbate labor shortages.

Workforce Pell Grant Program

Pell Grants are a form of federal financial aid for students in need that do not have to be paid back upon graduation. However, Pell Grants were historically available only to those seeking traditional college degrees. The OBBBA changes that, making Pell Grants available to individuals enrolled in qualifying short-term “workforce training programs,” such as those offered by trade, technical, and vocational schools. This change may increase the construction workforce as students take advantage of this training opportunity.

Qualified Expenses Under 529 Saving Plans

Parents and grandparents have the ability under federal law to invest money in 529 College Savings Plans (529 Plans) tax free to be used by their children or grandchildren to pay for certain college expenses. The OBBBA expands the use of those funds to include payment for qualified vocational programs, trade school, and professional licensing and certification programs. This change may also increase the construction workforce as students and parents can now take advantage of their 529 Plans for a broader range of educational and training opportunities.

Immigration Enforcement

According to the nonpartisan Brennan Center for Justice, the OBBBA “allocates more than $170 billion over four years for border and interior enforcement, with a stated goal of deporting 1 million immigrants each year.”[3] It is estimated that between 25% and 30% of construction industry workers are immigrants.[4] Consequently, the OBBBA may disproportionately affect the construction industry labor market. Construction industry professionals should expect: (a) increased I-9 Audits by U.S. Immigration and Customs Enforcement (ICE); (b) worksite enforcement actions; (c) labor shortages due to increased deportations and restrictive policies; (d) increased wages for lower-skilled workers and, in turn, increased construction costs; and (e) project delays due to labor shortages which may expose contractors to liquidated damages and other contractual penalties.

What Next? 

It is important for construction professionals to understand the OBBBA and to position themselves now to take advantage of tax and other project opportunities while mitigating potential losses because of the new law. Among other things, construction professionals should consider doing the following:  

• Consult an accountant or tax planner immediately to identify deductions, incentives, and other tax-saving opportunities available under the OBBBA for which your organization qualifies. 
• Evaluate and update accounting practices, budgets, debt structure, and operations to align with and realize tax planning and business opportunities created by the OBBBA.
• Consult with an attorney to evaluate and update your business structure to maximize pass-through tax benefits and/or to mitigate losses resulting from the permanent excess business loss limit.
• Consult with an attorney to address business succession and estate planning opportunities under the OBBBA. 
• Consult with an attorney to review pending bids and existing contracts related to renewable energy projects to mitigate potential losses and liabilities.
• Consider looking for new border wall, multifamily, manufacturing, and Opportunity Zone projects and positioning your business to seek and obtain such work.
• Evaluate workforce needs and consider workforce training program graduates as potential candidates for open positions.
• Read BHGR’s Five Trump Administration Changes in 2025 that Construction Industry Professionals Need to Know and Prepare For to learn more about labor shortages due to changes in immigration law and enforcement, and steps businesses can take to address these shortages. 

Our Team

BHGR’s Construction Group offers a depth of legal experience with complex horizontal, vertical, and subterranean construction projects. We proudly represent architects, design-build firms, engineers, general contractors, insurers, owners, subcontractors, suppliers, and sureties in public, private, and P3 construction projects throughout the United States and around the world. 

1. https://www.congress.gov/bill/119th-congress/house-bill/1/text
2. https://mackenzie.house.gov/sites/evo-subsites/mackenzie.house.gov/files/evo-media-document/homeland-security-obbba.pdf
3. https://www.brennancenter.org/our-work/analysis-opinion/big-budget-act-creates-deportation-industrial-complex
4. https://www.nahb.org/advocacy/industry-issues/labor-and-employment/immigration-reform-is-key-to-building-a-skilled-workforce/concentration-of-immigration-in-construction-trades