Even more impactful, the Act allows for retroactive recovery of unamortized R&E costs from 2022–2024, enabling companies to deduct those unamortized expenses that had been required to be capitalized. While the Act does not expressly enumerate specific industry practices, construction firms should determine if they have activities that qualify as Research and Experimentation expenses.

The OBBBA preserves the framework for pass-through entity tax (PTET) elections at the state levels, continuing to give S corporations and partnerships—particularly those in high-tax states—a valuable tool to manage the federal SALT deduction cap. The key benefit remains a reliable SALT workaround, offering flexibility in planning deductions and greater consistency across states that have adopted PTET regimes. Still, the rules are complex. Companies must pay close attention to deduction timing, owner distributions and state conformity provisions.

While corporate tax rates remain unchanged under the OBBBA, the legislation permanently extends several individual tax provisions that directly impact construction firms, particularly those that are mid-market, family-owned, or closely held and operate as pass-through entities. This creates a more complex tax environment that demands strategic coordination across entity structure, bonus depreciation planning and the revised R&E rules described above. To maximize these opportunities, construction businesses should evaluate timing strategies for income and expenses and assess their options for tax planning.

Contractors working on residential projects are among the biggest winners under the OBBBA. The Act does not expand the types of projects that qualify; but it changes the accounting method contractors may use. Specifically, the OBBBA expands eligibility for the completed contract method, allowing more residential construction projects—including apartment complexes, senior living facilities, dormitories and other multifamily structures—to defer income recognition until project completion. And does not result in an AMT (Alternative Minimum Tax) adjustment as it previously did. These changes should improve cash flow for contractors doing residential work by deferring the taxes on these projects until completed.

The One Big Beautiful Bill Act delivers a mix of clarity, opportunity and complexity for the construction industry. While the legislation offers expanded deductions, enhanced depreciation benefits and significant deferral opportunities, its retroactive provisions and critical elections mean there is no one-size-fits-all solution. Now is the time for contractors to work closely with their advisors to analyze and evaluate the impact of these changes on their tax picture going forward.

About the author: Phillip Ross, CPA, CGMA is an Accounting and Audit Partner and Chair of the Construction Industry Group at Anchin, Block & Anchin, LLP. For more construction industry thought leadership and content, log on to www.anchin.com.

Published: October 16, 2025.