On July 4th, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act (OBBB), a sweeping tax and economic reform package that his administration hailed as the centerpiece of its economic agenda.

The bill is a key component of the President’s overarching push to reshape domestic policy, and its provisions largely align with his ideological priorities. There’s close to $325 billion in additional spending allocated to the military, immigration enforcement, and border walls. There are deep funding cuts for environment protections and social services, too.

There’s also a plethora of significant tax breaks for businesses and individuals. Some are new, but many are renewals of expiring benefits codified during the first Trump administration in the Tax Cuts and Jobs Act (TCJA) of 2017 and set to sunset in the coming years.

The OBBB’s passage was met with widespread partisan praise and criticism. It was also greeted with near universal skepticism and cautious pessimism from numerous non-profit tax policy organizations that study such bills. The Congressional Budget Office (CBO) forecasted that the legislation’s tax cuts will reduce federal revenues by an estimated $4.5 trillion and cost $3.4 trillion over the next ten years. The Tax Foundation estimated that the OBBBA will increase GDP by 1.2 percent over the next decade, while increasing the deficit by over $3 trillion.

Succeed or fail, the bill’s provisions will be felt for years, and entire books could be written about the OBBB’s impact on the American and global economy. But that type of analysis is far beyond the scope of this article, which will focus on the legislation’s potential impact on the construction industry and the businesses operating within it. 

The OBBB’s overarching political and economic ambition is promoting a surge of domestic manufacturing. Its marquee deduction is a radical write-off option for building new manufacturing facilities within the United States, contained in a subsection called 168(n). This provision, brand new to the tax code, allows companies to immediately expense the full cost of construction on the qualified portion of a production facility the year it is placed into service, rather than depreciating its cost over 39 years.

An extremely simplified example: say a company called Stupendous Steel builds a new specialty steel plant for $70 million. They spend $50 million constructing fabrication bays, welding areas, blast booths, and $20 million on offices, restrooms, and hallways. Under the new guidelines, Stupendous Steel could expense the $50 million the year the facility is placed into service.

If their annual revenue was $60 million, their taxable income becomes $10 million. Pre-OBBB, they would only be able to deduct about $1.3 million in depreciation and would be taxed on $58.7 million of income. If their hypothetical federal tax rate is 28 percent, their bill dropped from $16.2 to $2.8 million.

There are numerous caveats and conditions that will apply, and the rules will be argued over by IRS auditors and tax professionals in the coming years. But some of the guidelines are clear: construction must begin after January 19, 2025, and before January 1, 2029. The plant must be operational by January 1, 2031, and remain in production for a decade. The building’s original use must begin with the taxpayer, meaning no build-to-lease allowed. Only the production related portions of the property qualify for the full depreciation. Areas such as fabrication bays, assembly floors, or refining space count; offices, bathrooms, and hallways don’t.

This is a significant shift, designed to lower the effective cost of manufacturing construction. By easing financing pressures and improving cash flow early in a project’s life, the OBBB aims to make large scale manufacturing construction and modernization projects more financially attractive and easier to justify to lenders and investors. As such, the OBBB’s passage was advocated for and praised by the National Association of Manufacturers, The Association of Equipment Manufacturers, and the Association of General Contractors (AGC).

“I believe that the growth opportunity this presents could be unprecedented,” said Michael Kapics, of HBK CPA’s and Consultants. “As manufacturing companies look to take advantage of this deduction, there will be tremendous opportunities for growth presented to construction companies. Those that stay active in pursuit of manufacturing companies looking to expand should see a significant increase to their revenue and profitability.”

The data on whether this construction boom of manufacturing centers is happening remains murky. CoStar, a commercial real estate data aggregator, shows that nationwide the inventory of specialized industrial supply is set to grow by nearly one percent by the end of 2025, the highest level in a decade. However, CoStar’s labeling of manufacturing facilities can be haphazard and that figure should be taken with a grain of salt.

The latest federal data present a mixed picture. The Census Bureau reported total construction spending at a $2.21 trillion annualized rate in August, up 0.2 percent from July but down 1.6 percent year over year, with manufacturing construction declining for the seventh straight month and falling 8.5 percent from August 2024.

Yet the forward-looking indicators tell a different story. According to Dodge Construction Network, total U.S. construction starts surged 21 percent in October, led by a sharp rebound in nonbuilding activity, which climbed nearly 60 percent month over month as utility projects alone jumped by almost 400 percent — suggesting that while current spending has cooled, the project pipeline may already be shifting.

The Yale Budget Lab estimates that there will be a surge in construction and manufacturing but cautions that it will be short-lived. The group forecasts a short-term demand spike so rapid that the Federal Reserve raises interest rates to keep inflation in check. Investors will anticipate the higher borrowing costs, yields on long term bonds will rise too, adding more upward pressure on rates. Those higher rates will make borrowing for equipment and construction rise, gradually cooling investment. Over time, the cost of financing will outweigh the benefit of the bill’s write-offs. 

The Bipartisan Policy Center also believes that there will be a short-lived boom in manufacturing construction and add an additional concern about timing. Many factories take years to build and advanced manufacturing, the kind the Administration is angling for, can sometimes take a decade. This means that the most specialized facilities might not be operational within the bill’s set time parameters.

The administration is claiming that this boom is beginning, and there are significant examples of an uptick in domestic manufacturing interest. Apple, OpenAI, Meta, and Nvidia announced in 2025 plans to spend more than $1 trillion combined on increasing their domestic manufacturing capabilities. Scores of additional firms, both domestic and international have also made 2025 announcements signaling significant plans to spend hundreds of billions on manufacturing facilities across the country.

Manufacturing success or failure will play out over the next five years, but the OBBB will indisputably provide immediate financial benefits for many in the construction industry. The same levers of accelerated cost recovery are applied beyond factory construction, and the bill contains numerous other depreciation incentives for builders large and small.

This was the main reason that the AGC lobbied for the bill’s passage and sent a “Key Vote” letter to sitting U.S. Senators, letting them know that the agency approved of its provisions and advising that its 27,000 members were watching how the Senator voted. 

“The main win for us in the OBBB was the permanent extension of all those expiring 2017 tax cuts,” said Deniz Mustafa, senior director of infrastructure and finance at the AGC.

“If those had gone away, most of our members would have seen a big jump in their tax obligations. It also makes it much easier for businesses to plan ahead. What their tax years are going to look like, whether they want to acquire additional equipment, and whether they can do R&D expensing. It provided certainty and predictability.”

One of the main upgrades general contractors will benefit from is a renewal of depreciation benefits in 168(k). Like 168(n), Section 168(k) allows businesses to immediately deduct a large portion of the cost of qualifying assets instead of depreciating them slowly over time. The difference between the two is that the former pertains to production facilities while the latter applies to equipment. 

First introduced in 2002 as an economic stimulus measure post-9/11, Section 168(k) was supercharged by the first Trump Administration in the TCJA, which raised bonus depreciation to 100 percent for assets placed into service from 2018-2022. The bonus phased down annually and was set to sunset entirely in 2027, but the OBBB reset the rate to 100 percent and made it permanent for qualified property placed into service after January 19th, 2025.

Qualified property can include heavy machinery, tools and office gear, manufacturing equipment, and certain interior improvements. This enables contractors to immediately depreciate costly equiptment purchases, improving cash flow and lowering the effective cost acquisition. Because the deduction is once again a certainty, firms can more confidently plan to replace and upgrade their equipment.

Section 179 is the Main Street version of this instant equipment write off and has long been a small business incentive that encourages contractors, trades and local firms to reinvest quickly in their equipment by allowing them to expense their costs against their taxable income. The OBBB raised the limits of this write off, from $1.22 million to $2.5 million, and the cutoff threshold from $3 million to $4 million.

The benefit is limited to smaller businesses by a write-off cap which, when exceeded, comes at a dollar-for-dollar reduction loss. So, if a contractor called Craig’s Construction buys $2 million in trucks, trailers, and tools in 2025, they are under the limit and can deduct the full $2 million immediately. But if they grow and in 2026 buy $4.6 million in equipment, they are $600,000 over the threshold and could only deduct $1.9 million.

“This is very nice for contractors,” said Brian Kassalen, a principal at Baker Tilly. “Especially for small and mid-sized ones. We have a lot of contractors who are purchasing $2-$2.5 million, maybe more. So, they were previously capped and now they’re going to get the full 179 deduction.”

Accelerated write-offs make it easier to spend, but most borrow to build. Section 163(j) is another revised lever of the OBBB, designed to increase the amount of interest a firm can write off. This revision, originally made in the TCJA, expired under the Biden administration. From 2022 to 2024, a firm’s interest deductions were capped at 30 percent of adjusted taxable income (ATI), which was based on earnings before interest and taxes (EBIT). So, if Commonwealth Construction had $10 million in ATI and $5 million in loan interest, they could only deduct $3 million. 

But beginning in 2025, the ATI is now calculated using earnings before interest, taxes, depreciation, and amortization (EBITDA). Allowing depreciation and amortization back in generates a higher-level ATI, which leads to a larger deduction. Now, if Commonwealth has $500,000 in amortized costs and ten percent depreciation on $1 million worth of equipment, their ATI is $10.6 million, and their deduction rises to $3.18 million.

“The ability to add back depreciation and amortization can be significant because it could allow for greater interest expense deductions,” says Mark DiPietrantonio of Schnieder Downs. “Additionally, it could also result in excess taxable income, resulting in the deductibility of past interest expenses that were suspended in prior tax years due to the more limiting EBIT base.”

The law tightens oversight by requiring “capitalized interest”, that is interest rolled into the cost of a project, to be counted toward the deduction limit. In prior years, Commonwealth Construction could roll their $5 million in interest into the total cost of their project. If they were building a $20 million dollar drywall manufacturing facility, they could say its total cost was $25 million and then depreciate that $25 million building over the next few decades.

The OBBB ends that loophole and now all interest counts toward the cap. However, it retains flexibility by permitting qualified businesses to opt out of the cap entirely, albeit with a cost. By doing so, a builder forfeits access to the potent bonus depreciation offered to them in section 168(k).

For builders of non-manufacturing buildings, this provides extra options. An office developer could choose to deduct all their interest with little to no change in their depreciation deductions. But a company like Stupendous Steel would have to choose between deducting all its interest payments immediately or losing its 100 percent depreciation write-off.

“The decision to forgo bonus depreciation was somewhat easier when bonus depreciation was scheduled to be phased out. Now that 100% bonus depreciation is available in 2025 and permanent going forward, the decision to elect out of 163(j) will be more difficult for some”, says DiPietrantonio.

These decisions shape the economics of building itself but there are also significant changes to backend expenses that come before construction begins. Of particular significance is a change involving research and development. After the 2022 sunset of an R&D provision in the TCJA, businesses were required to amortize their research and development expenses over five to fifteen years instead of deducting them up front.

The OBBB brings back immediate expensing for U.S. based research, meaning that firms investing in things like new construction processes, prefabrication systems, or project management can write them off immediately. Additionally, the change is retroactive and forward looking.

Smaller taxpayers, generally those with less than $25 million in gross receipts, can amend their 2022 and 2023 returns to reclaim deductions they previously had to defer, potentially triggering meaningful refunds. Larger firms that capitalized costs in 2022 through 2024 can now expense those amounts either entirely in 2025 or split the deduction evenly between 2025 and 26. In practical terms, that means companies that invested heavily in process modeling, energy efficient design, or construction tech development, will be able to free up substantial cash during the next two filing cycles.

Another TCJA option set to sunset and given new life by the OBBB is the 20 percent 199A deduction. A substantial number of construction firms are not corporations, where taxes are paid by the corporate entity. Rather, they operate as what are called pass through entities. That’s because the profits pass through to the owner’s personal tax return, which the owner is responsible for paying, even though in most cases that income goes directly back into the business. Like personal income, the more business income that is earned the more that income gets taxed, and the 199A is a deduction of that tax.

Another extremely simplified example: If Commonwealth Construction is a pass through owned by Bob Smith and earned $1 million in profit after paying all expenses including Bob’s salary. That one million of profit can “flow through” to Bob’s personal tax return as qualified business income, even though it is oftentimes redirected right back into the business. This deduction could enable Bob to reduce the federal tax rate of that $1 million down to 29.6%, saving him $80,000.

“This is a significant tax benefit that’s very impactful for all pass-through entities, regardless of size. The 20 percent deduction can reduce the highest federal tax rates on qualified income from 37 percent to 29.6 percent,” says DiPietrantonio.

Mustafa echoes this sentiment and says its passage is a major win for the industry.

“About 75 percent of AGC members are pass-through entities, so this would have had a major impact on general contractors. If the qualified business income had expired, C-corps would have had a massive tax advantage, and many businesses would have had to restructure to remain competitive.”

The reason that most AGC members are pass-through is that the construction industry has an inordinate number of businesses that are family owned, and another one of the OBBB’s impactful tax breaks for is locking in a higher federal estate tax exemption.

Family-owned businesses have the business value factored into an owners’ net worth. So, if the owner dies, their estate might be of significantly higher value than their personal wealth. Before the bill, that exemption, essentially the amount of wealth a person can pass on at death before federal estate tax applies, was scheduled to drop to about $5.5 million per individual.

Should an owner of a family business suddenly pass, such a drop could be catastrophic for family businesses.

“The estate tax isn’t something you can always plan for. If an owner dies unexpectedly the family could have to sell their business just because of the tax liability,” explains Mustafa.

The OBBB stops that rollback and instead sets the threshold at $15 million per person starting in 2026, with future increases automatically tied to inflation.

There is also an additional and related perk within the OBBB regarding passing along family-owned businesses.

“Many construction business owners are faced with the concept of developing and incorporating a succession plan, “says Greg Allison, who leads the Gift and Estate group at Schneider Downs. “Many times, that plan involves lineal descendants and moving ownership to some or all those individuals through the gifting of ownership shares. One of the most common hurdles that gets in the way for higher valued businesses is the fact that the owners can only gift so much of the business up to the value of the estate tax exemption. A higher exemption generally affords owners with more capacity to implement this rather straightforward strategy of passing along ownership to the next generation.”

Another consequential provision for developers within the OBBB is the expansion of the exception to the large percentage of completion method (PCM) of accounting for housing development. For decades, developers of large multifamily communities had to pay taxes on income as a project was underway, even if their units were not occupied.

Under the old PCM rules, a builder might owe tax on 60 percent of a project’s profit halfway through construction, even though cost overruns, change orders, or delayed draws could wipe out that margin by completion. The OBBB now let’s those contractors to elect a different method called the completed-contract method, meaning income isn’t recognized until the project is substantially finished.

The policy goal is to promote the development of high demand residential housing by removing a tax timing penalty that made long capital-intensive projects less attractive. Multifamily, senior living, and student housing developments often span multiple years and rely on complex financing structures. Additionally, residential does not just apply to single family homes or multifamily projects. Student housing, senior care, military barracks, and prisons all qualify.

The OBBB also makes Opportunity Zones (OZ) a permanent part of the tax code. But starting in 2027, the Treasury Department will maintain a rolling 10-year designation cycle for eligible census tracts, allowing Opportunity Zones to update over time as communities evolve rather than freezing old maps in place.

At the end of 2026, all areas currently designated as Opportunity Zones will sunset and states must redesignate them, and states must redesignate their zones every ten years. Governors will have 90 days to nominate new tracts for Treasury approval, and the updated zones become effective for new investments on January 1st, 2027. Governors may designate up to 25 percent of their state’s eligible tracts, or up to 25 total tracts if the state has fewer than 100 eligible.

The threshold for qualifying as a “low-income community” drops from 80% of median income to 70% or meet a 20 percent poverty threshold without exceeding 125 percent of area median income, a new cap which disqualifies many previously qualifiable neighboring tracts to qualify by proximity is eliminated.

Investors will now work within tighter definitions of economic distress but will benefit from a simplified five-year gain deferral period, and, for rural investments, a larger 30 percent basis step-up, meaning a greater share of capital gains can be permanently excluded from tax.

These provisions and extensions will no doubt save and create wealth for contractors, but it is not all good news. The bill traded long-term tax certainty in exchange for tighter loss limitations and the accelerated phase out of clean-energy incentives, shifting risk toward firms operating in cyclical or capital-intensive segments.

“The biggest loss that affects the whole industry is the limiting of excess business losses,” said Mustafa.

This means that if a construction company has a significant down year, they can no longer claim all those losses in that tax year, instead they must spread them out over five years. This could provide a painful crunch for many as construction is cyclical by nature, and the instant write-off of the losses kept some companies afloat during a bad year. 

This is now permanently removed by the OBBB, and another component that could have a profoundly negative impact on construction is the sunsetting of Section 179D’s enhanced deduction structure. For nearly two decades, 179D has served as the construction industry’s flagship incentive for energy efficient building. It allowed building owners to claim a deduction per square foot for installing high efficiency lighting, HAVAC, or building envelope systems.

It also supercharged under the Biden administration, allowing for major deductions on projects that achieved measurable energy savings, used prevailing wages, and incorporated domestic materials. The credit’s structure means that everything from K-12 school retrofits and university labs to federal courthouses and corporate offices could recover a significant portion of their upfront efficiency costs through taxes.

“That’s billions of dollars in incentives going away”, says Mustafa. “And it has driven a major boom in construction over the past few years.”

A quieter change in the bill alters how “beginning construction” is defined and it is one that many will feel in day-to-day work. Projects now have to show real physical progress, not just early spending, and once construction starts, it has to keep moving. This removes a lot of flexibility owners previously had to pause, resequencing, or slow work without consequences.

In practice, it could raise the temperature on job sites. Owners now have more at stake, schedules get tighter, and any delay carries more financial weight than before. Even though the tax credit sits upstream, the pressure will flow down, likely showing up as more urgency and less tolerance for slippage.

Even with these downsides, for the construction industry there’s a lot to like in the OBBB. Though not without trade-offs, the bill’s practical effects for the construction industry are expansive. By creating and extending a wide variety of tax breaks and incentives, the OBBB delivers substantial and immediate value to contractors of all sizes. Whether it’s far more ambitious goal of reshoring manufacturing and reorienting investment back toward domestic production is successful or generates more construction jobs remains uncertain and will depend on forces well beyond taxes.