A major tax bill — unofficially dubbed “The One Big Beautiful Bill” — is moving through the House of Representatives. With the House Rules Committee scheduled to meet on May 21, this reconciliation package combines tax reform with other legislative measures. While the Senate is expected to pursue its own version, the House proposal signals key changes that could reshape the tax landscape for construction and contracting businesses.
Key Business Provisions That Could Impact Contractors
1. 100% Bonus Depreciation Extended
If your business invests in heavy machinery, vehicles, or tools, this one is big. The bill proposes to extend 100% bonus depreciation on qualified property through the end of 2029. This means you can continue writing off the full cost of most equipment in the year it’s placed in service — boosting cash flow and offsetting large purchases.
Alongside bonus depreciation, the bill expands Section 179 expensing limits. This is particularly useful for smaller contractors who invest in equipment or office improvements, allowing faster deductions without having to depreciate over time.
3. Business Interest Deduction Relief
From 2025 through 2029, the bill allows businesses to calculate their interest deduction based on EBITDA (earnings before interest, taxes, depreciation, and amortization), instead of the stricter EBIT method. For contractors carrying debt on equipment or property, this change could free up more deductions.
4. Research & Development (R&D) Expenses
Many construction firms are surprised to learn they qualify for the R&E tax treatment — especially those involved in design-build projects, new methods, or materials testing. The bill suspends the requirement to capitalize and amortize domestic R&E costs, allowing full expensing from 2025 to 2029.
5. Qualified Business Income (QBI) Deduction
The QBI deduction, key for sole proprietors, S corps, and partnerships, would increase from 20% to 23% and be made permanent starting in 2026. This improves bottom-line tax savings for many construction business owners operating pass-through entities.
Tax Credit Changes That May Affect Hiring or Projects
Employee Retention Credit (ERC) Termination
The bill retroactively shuts down ERC claims filed after January 31, 2024, and raises penalties for improper claims. If you’ve used or planned to use the ERC, it’s critical to review any outstanding filings with your CPA.
Low-Income Housing Tax Credit (LIHTC) Expansion
If your firm participates in affordable housing construction, the expansion of the LIHTC program could create new opportunities for partnerships, projects, or financing.
IRA and Energy Credit Rollbacks
Contractors in green building or clean energy installation should take note: the bill would end or phase out several Inflation Reduction Act tax credits by the end of 2025 or 2031. These include residential energy credits, clean fuel production credits, and others — potentially shifting demand or incentives in those project categories.
Individual & Estate Planning Considerations for Owners
If you’re a contractor who files taxes as an individual or owns a closely held business, these personal tax provisions could affect you:
- Standard Deduction Boost: A temporary increase of $2,000 for joint filers (2025–2028).
- SALT Deduction Cap Raised: From $10,000 to $30,000 starting in 2026, with income-based phaseouts.
- Child Tax Credit: Temporarily increased to $2,500 per child (2025–2028), then settles at $2,000.
- Estate Tax Exemption: Permanently raised to $15 million in 2026, indexed for inflation — a major win for contractors with large estates or multi-generational businesses.
What Construction Business Owners Should Do Now
- Plan Equipment Purchases: If you’re considering major capital investments, the bonus depreciation extension may influence timing.
- Review Interest and Loan Strategies: The return to EBITDA-based interest deductions could affect financing decisions.
- Reevaluate R&D Eligibility: Don’t assume it doesn’t apply — explore whether your project innovations qualify.
- Check Your ERC Position: If you filed ERC claims in early 2024, ensure compliance under the new retroactive termination.
- Consider Estate Planning Updates: With the estate exemption likely to increase, this may be a good time to revisit your succession or estate strategy.
PriceKubecka’s Here to Help
Questions about how this legislation might affect your business or tax strategy? CONTACT US. Our team is ready to help you navigate the details. Let’s make sure you’re positioned to take full advantage of what’s ahead.
Disclaimer: This article is for informational purposes only and should not be construed as legal or tax advice. Please consult with us individually for guidance tailored to your specific circumstances.