As 2025 draws to a close, construction contractors are facing one of the most significant tax planning years in over a decade.
With the passage of the OBBBA, contractors now have access to expanded deductions, new incentives, and revised accounting rules that will directly affect cash flow, job costing, and long-term planning.
To help contractors prepare, SVA, in partnership with CICPAC, has developed this whitepaper to break down what these changes mean and what steps businesses should take before year-end.
OBBBA introduces sweeping tax reforms aimed at accelerating investment and simplifying compliance across the construction sector.
Key 2025 Updates Include:
| Permanent 100% Bonus Depreciation | Contractors can now immediately expense qualifying equipment and property with no future phase-outs. This change is retroactive to January 19, 2025 and encourages strategic year-end capital purchases. |
| Expanded Section 179 Expensing | The expensing limit jumps to $2.5 million, with a phase-out beginning at $4 million. This provides significant benefits to small and mid-sized construction companies. |
| Improved Interest Expense Deductions | The interest limitation now uses an EBITDA-based calculation, allowing more capital-intensive contractors to deduct a larger share of interest expense. |
| Permanent Section 199A Deduction | Pass-through entities (S corps, partnerships, and sole proprietors) can continue claiming the 20% Qualified Business Income deduction, now permanently built into the tax code. |
| Restored R&D Expensing (Domestic) | Domestic research and experimental expenditures can once again be fully deducted in the year incurred, beginning in 2025. Retroactive provisions may create refund opportunities for eligible contractors. |
Domestic research and experimental expenditures can once again be fully deducted in the year incurred, beginning in 2025. Retroactive provisions may create refund opportunities for eligible contractors.
The whitepaper outlines:
Contractors near the $31 million average revenue threshold (2025 inflation-adjusted amount) will want to revisit their current methods before year-end.
Contractors near the $31 million average revenue threshold (2025 inflation-adjusted amount) will want to revisit their current methods before year-end.
| Excess Business Loss Limits | Permanent rules now apply, affecting owners of pass-through entities. |
| Business Interest Deduction Planning | Changes to IRC §163(j) may significantly affect leveraged contractors and those with real property trades or businesses. |
| Estate and Gift Tax Planning | The lifetime exemption will jump to $15 million per individual in 2026, creating strategic opportunities for succession planning. |
| Retirement Plan Updates Under SECURE & SECURE 2.0 | Deadlines for adopting new plans, enhanced catch-up contributions, Roth treatment options, and student loan matching contributions are highlighted for contractors wanting to strengthen retention and benefits offerings. |
| Mobile Workforce Considerations | 2025 mileage rates, per diem updates, and best practices for multistate compliance are summarized. |
| Opportunity Zones (Updated Under OBBBA) |
For developers, major rule changes, including a new permanent program for investments made after 2026, create fresh incentives for future projects. |
Many of the 2025 changes require proactive planning before December 31, especially those that impact:
With several provisions already in effect, year-end planning can have an immediate cash-flow impact.
To explore detailed examples, charts, planning strategies, and action steps for contractors, download the full whitepaper.
Whether you’re a general contractor, specialty subcontractor, or construction industry advisor, our year-end guide will help you confidently navigate the evolving tax landscape and identify valuable savings opportunities.
© 2025 SVA Certified Public Accountants