Tax Planning or Tax Paying? End of Year thoughts for Construction and Trades Companies
Construction/trades firms face unique tax-challenges: irregular cash flows, long-term contracts, heavy equipment and vehicle purchases, retention and bonding issues, seasonal workforce swings, and the interplay of entity structure (S-corp, partnership, LLC) with pass-through tax rules and income timing. With the new legislation effective July 4, 2025 (for many provisions) the landscape has shifted, which presents planning opportunities and risk-points.
Key changes for the construction/trades sector
100% bonus depreciation reinstated – Under the OBBBA, qualifying property placed in service after January 19, 2025 is eligible for full first-year expensing (100 % bonus depreciation) rather than the phase-down schedule that had been in transition. For contractors this means if you purchase heavy equipment, vehicles (that qualify) or certain improvements you may deduct the full cost immediately rather than taking it over multiple years. That improves cash flow and lowers near-term tax burden.
Expanded Section 179 immediate expensing – The deduction cap under Section 179 has been increased substantially: up to $2.5 million of eligible business expenditures, phase-out at $4 million. For a larger trades business this means upgrading your fleet, equipment, tools or leasehold improvements may now be accelerated into the current year.
Contracts/income recognition shifts – The OBBBA expands eligibility of the completed-contract method (CCM) for “residential construction contracts” starting after July 4, 2025 (i.e., tax year 2026 for calendar-year taxpayers) allowing deferral of income recognition until project completion. For a subcontractor working in residential development, this gives a strategic tool to manage taxable income year-to-year in a year of heavy volume.
Opportunity to optimize cash-flow via deduction timing – Given the enhanced depreciation and expensing rules, planning the timing of major purchases (equipment, vehicles, improvements) to fall into calendar year 2025 (or early 2026) may make a significant difference. For example, placing equipment in service before year-end may trigger full deduction in that year rather than future years.
Watch for phase-out and sunset dates – Many of the changes are subject to placement-in-service deadlines (e.g., for certain real-property manufacturing/production property). The construction industry needs to track when “begins construction” or “placed in service” deadlines apply.
Practical planning tips for Utah construction/trade businesses
Coordinate purchase timing of capital equipment and vehicles based on when you place them in service. For example, if an excavator is delivered late 2025 you may qualify for full year deduction versus waiting.
Review your contract revenue recognition method (percentage-of-completion vs completed-contract) especially for residential work. If the expanded CCM eligibility applies to your projects, you may defer revenue into later years—helpful if 2025 is a big year.
Assess entity structure and pass-through income – with accelerated deductions you may shift some profit out of the business via expensed equipment, lowering pass-through income and associated tax burden.
Monitor state and local nexus issues – Utah contractors often have multi-state exposure. Increased federal deductions may reduce federal taxable income, but some state tax rules may differ; coordinate with state-law deductible timing.
Don’t ignore long-term capital strategy – While taking full deductions now is attractive, ensure you still maintain sufficient basis, track disposition and potential recapture issues, and maintain accurate assets detail.
Consult early – Because OBBBA is recent and IRS guidance is still emerging, work with your CPA to ensure documentation meets placed-in-service and “qualified property” definitions for the new rules.
Bottom line
For construction and trades businesses, the One Big Beautiful Bill offers meaningful tax-planning levers: full first-year expensing of eligible assets, higher Section 179 limits, and potential deferral of contract income. Firm-level strategy around timing, equipment purchases, contract methods and entity income flows will be critical to maximizing benefit and minimizing surprises. However, this is not a “set-and-forget” change—monitor guidance, maintain documentation, and align planning with cash-flow, insurance, bonding and payment-contracting realities of the construction/trades environment.