Ten Key Opportunities and Challenges for Contractors, Developers, and Investors under OBBBA

By Chuck Sabol, CPA, MBA

The recently passed One Big Beautiful Bill Act (OBBBA) marks a major shift in the tax landscape for construction and real estate businesses.

By extending several provisions from the 2017 Tax Cuts and Jobs Act and introducing new incentives, the OBBBA creates fresh opportunities for savings, while also eliminating certain credits that may increase costs.

Here’s a breakdown of the most impactful provisions, what they mean for your business, and how to prepare:

1. 100% Bonus Depreciation

What it does: Permanently reinstates 100% bonus depreciation for qualified property (construction equipment, vehicles, leasehold improvements) placed in service after January 19, 2025.

Implications: Businesses can fully deduct the cost of eligible assets in the year they’re placed in service, enhancing cash flow and reducing taxable income.

Action steps:

• Conduct cost segregation studies
• Adjust project timelines to ensure property is placed in service after January 19, 2025
• Model the impact on cash flow and tax liabilities\

2. Qualified production property deduction

What it does: Creates a temporary 100% depreciation allowance for owner-occupied, nonresidential real property used in production or manufacturing starting between January 20, 2025, and December 31, 2028, and placed in service by January 1, 2031.

Implications: Encourages development of logistics, warehouse, and other industrial projects by enabling immediate deductions.

Action steps:

• Confirm tenant operations meet eligibility criteria
• Structure projects for long-term ownership (10 years) to avoid depreciation recapture
• Explore development partnerships in industrial sectors

3. Expanded Section 179 expensing

What it does: Raises the Section 179 deduction cap to $2.5 million, with a phase-out threshold of $4 million, starting in tax year 2025.

Implications: Makes it easier for small and mid-sized firms to expense equipment, vehicles, and certain improvements immediately rather than depreciating over time.

Action steps:

• Review and update capital expenditure plans
• Consider timing purchases to maximize deductions
• Coordinate with your tax advisor to optimize expensing strategies

4. Permanent QBI deduction

What it does: Makes the 20% Qualified Business Income (QBI) deduction under Section 199A permanent for pass-through entities.

Implications: Provides consistent tax relief for S corps, LLCs, and partnerships, helping long-term planning for construction and real estate firms.

Action steps:

• Confirm that your entity structure qualifies
• Reevaluate your tax strategy and restructuring needs
• Forecast tax impacts under different income scenarios

5. Business interest deduction enhancements

What it does: Permanently switches to an EBITDA-based limit (30% of earnings before interest, taxes, depreciation, and amortization) for business interest deductions starting in tax year 2025.

Implications: Allows capital-heavy firms to deduct more interest, especially helpful in high-rate environments.

Action steps:

• Reassess current financing terms
• Model tax impacts under EBITDA rules
• Consider refinancing or restructuring existing debt

6. Low-Income Housing Tax Credit (LIHTC) expansion

What it does: Permanently boosts state LIHTC allocations by 12% and lowers the bond-financing threshold for 4% credits from 50% to 25% for projects placed in service after December 31, 2025.

Implications: Improves the financial outlook for affordable housing developments by increasing investor equity and project feasibility.

Action steps:

• Identify eligible projects
• Adjust financing strategies to take advantage of credits
• Monitor state-specific LIHTC allocation updates

7. Opportunity zones and New Markets Tax Credit (NMTC)

What it does: Makes both programs permanent, with a 50% improvement requirement in rural QOZs and a $5 billion annual NMTC allocation.

Implications: Encourages long-term investment in underserved areas, opening up new opportunities for construction, infrastructure, and redevelopment.

Action steps:

• Track new Opportunity Zone designations
• Collaborate with developers on OZ/NMTC-qualified projects
• Prepare for expanded IRS reporting obligations

8. Rollback of clean energy tax credits

What it does: Ends the Section 179D deduction and 45L credit for projects beginning or acquired after June 30, 2026, and phases out clean electricity credits for projects not in service by the end of 2027

Implications: Removes incentives for energy-efficient construction, potentially increasing costs and changing design incentives.

Action steps:

• Accelerate timelines for energy-efficient projects
• Update budgets to reflect reduced credits
• Explore alternative sustainability certifications and incentives

9. Expanded use of completed contract method

What it does: Broadens eligibility for using the completed contract method (CCM) to defer revenue recognition for all qualifying residential construction contracts.

Implications: Reduces tax complexity and improves cash flow for contractors and developers working on projects with a three-year estimated completion and meeting the gross receipts test.

Action steps:

• Review contracts and confirm they meet the gross receipts and timeline thresholds
• Consider restructuring contracts to qualify
• Evaluate effects on annual income timing

10. Immediate expensing of domestic R&E expenditures

What it does: New Section 174A allows full expensing of domestic research and experimental (R&E) costs starting in 2025, while foreign R&E expenses must still be amortized over 15 years.

Implications: Encourages innovation by improving cash flow through upfront deductions, but creates a need to distinguish between domestic and foreign R&E.

Action steps:

• Update accounting systems to separately track R&E costs
• Consider electing amortization for domestic R&E if advantageous
• Evaluate long-term impact on taxable income

Bottom line

The OBBBA creates a significantly more favorable tax environment for many construction and real estate businesses. The Boyer & Ritter team is ready to help you navigate the changes under OBBBA and ensure your business takes full advantage of the opportunities — and avoids costly missteps.

About the Author

Chuck Sabol, CPA, MBA is a manager in Boyer & Ritter’s Tax practice group. He brings several years of public and private accounting experience, specializing in tax, and has worked with clients of various sizes.