One Big Beautiful Bill: Construction Tax Changes for Commercial Subcontractors

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law, delivering permanent business tax reforms that could have a big savings impact on construction businesses, including commercial subcontractors. From equipment write-offs that free up cash this year, to permanent deductions for pass-through income, to time-sensitive energy credits, the new law changes how you plan projects, buy gear, and even structure your business. 

Here’s a breakdown of what’s in it for the commercial trades and how to take advantage before opportunities pass you by.

1. Bigger, Faster Write-Offs for Equipment

100% Bonus Depreciation

OBBBA makes 100% bonus depreciation permanent for both new and used qualified property. That means cranes, bulldozers, forklifts, site trailers—all these costs can now be fully deducted in the year they’re placed into service.

Boosted Section 179 Expensing

Section 179 now allows a permanent expensing limit of up to $2.5M—with a phase-out beginning at $4M—letting you immediately deduct qualifying equipment purchases up to much higher limits.

Together, these two tools are all about accelerated write-offs (great news for heavy-asset trades like concrete, excavation, and steel). Instead of tying up cash in long depreciation schedules, subcontractors can use the savings to fund payroll, materials, or the next big job.

Takeaway: If you’re trying to decide whether to buy equipment outright or lease it, you should consider that you can now write off 100% of the purchase cost immediately.

2. Pass-Through Tax Relief and SALT Cap Workarounds

Section 199A (QBI Deduction)

Subcontractors set up as S-corporations, partnerships, or LLCs (also known as pass-through entities) can now permanently claim a 20% break on their business income. This deduction lowers taxable income for owners and is here to stay, providing more certainty for long-term planning.

SALT Cap Workarounds

OBBBA raises the personal SALT (state and local tax) deduction cap from $10,000 to $40,000 (with income phase-downs). This eases the pinch for owners in high-tax states, but doesn’t fully eliminate exposure.

Meanwhile, the Pass-Through Entity Tax (PTET) election—offered in many states—remains an effective workaround to the SALT cap. By letting the business itself pay income taxes at the entity level, rather than the owner level, PTET keeps those taxes deductible federally. When layered with a higher SALT cap, PTET can deliver some solid savings, especially for multi-state contractors. 

Takeaway: Work with your finance team to model the combined impact of the QBI deduction, the new SALT cap, and PTET elections for optimal tax savings.

3. Estate Planning Gets Easier

For owners thinking long-term, OBBB permanently raises the estate tax exemption to $15M per individual, indexed for inflation. This is up from about $14M in 2025—and a sharp reversal from the expected drop to $7M that was scheduled to take effect in 2026.

Takeaway: If succession planning is on your radar, now’s the time to revisit your estate strategy while this exemption is in place.

4. R&D Expenses Back to Immediate Deductions

A quiet but important change: Research and development (R&D) expenses are once again immediately deductible, reversing the 2022 requirement to spread them out over five years. 

‍Takeaway: Don’t assume R&D only applies to tech companies. If you’re improving processes, integrating software, using prefabrication methods, or adopting energy-efficient construction practices, you may qualify. That means immediate tax savings and a boost to your bottom line.

5. Interest Deduction Expanded

The bill also makes a small but helpful adjustment to interest deduction limits—they’re now calculated using EBITDA (earnings before interest, taxes, depreciation, and amortization). Previously, depreciation and amortization were excluded, restricting the deduction.

Takeaway: For subcontractors financing equipment or carrying debt, this means a bigger share of your interest is deductible.

6. Qualified Production Property (QPP) Expensing

A new and powerful provision allows 100% expensing of certain newly constructed nonresidential buildings used for manufacturing or production—if construction begins after January 19, 2025, and the property is placed into service by December 31, 2030.

Takeaway: For subcontractors tied into prefabrication, modular construction, or specialty production facilities, this creates a rare chance to fully deduct the cost of new building projects upfront.

7. Expanded Accounting Methods

Subcontractors can now use the Completed Contract Method (CCM) of revenue recognition more broadly, particularly for projects—like multi-unit residential (more than four units)—that finish within three years. This allows contractors to delay recognizing income until a project is completed, giving greater flexibility in tax planning.

Takeaway: If you qualify for CCM, you could significantly smooth out taxable income and better align revenue with when project cash actually comes in.

8. Payroll and Reporting Updates

Most of the payroll tax relief in OBBBA targets industries like restaurants and hospitality. While construction doesn’t benefit much from the overtime or tip credit provisions, two changes may still matter for some subcontractors:

1. Payroll Relief (2025–2028): Limited credits reduce payroll tax burdens in select industries, but construction is largely excluded. Worth flagging only if you have side operations with tipped or service employees.
2. 1099 Reporting Threshold: The threshold for issuing Form 1099 rises from $600 to $2,000 (indexed for inflation). This means fewer small vendor or subcontractor payments will trigger reporting, easing some admin load.

Takeaway: Don’t expect major payroll savings from OBBBA, but do take note of the lighter 1099 reporting requirements.

9. What’s Sunsetting

Not everything is permanent. A few construction-related incentives will expire after June 30, 2026, including some energy-related tax credits, like Section 179D (energy-efficient buildings), and vehicle credits.

Takeaway: If you’re considering energy upgrades or alternative fuel vehicles, move fast to capture these credits before they disappear next year.

All Said and Done

The OBBBA locks in many of the tax benefits subcontractors have relied on since 2017—and introduces new provisions that affect how and when you spend, recognize income, and plan for growth. That all circles back to one thing: managing cash flow with confidence.

That’s exactly where Siteline helps. Our billing software is built for subcontractors—automating pay apps and lien waivers so every invoice is accurate and on time. With clear A/R aging, billing and cash forecasts, and project health dashboards, you’ll always know where your cash stands and where it’s headed. Interested in learning more? Book a no-pressure demo here.