Traverse City contractors know how to operate with precision—and now, it’s time to apply that same mindset to your tax strategy. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces powerful tax planning opportunities for Michigan-based contracting and trade service businesses – including electrical, plumbing, hvac, construction, roofing, landscaping, and more. Whether you’re managing seasonal crews, investing in new equipment, or bidding on multi-unit developments, this bill can help you reduce your tax burden and reinvest in growth.
Contractors, builders, and all trade professions can turn complex tax law into business advantage. Below is a breakdown of key provisions and a seasonal checklist to help you act before year-end.
Key Tax Planning Opportunities
Take Advantage of 100% Bonus Depreciation
Contractors can now deduct the full cost of qualifying equipment, vehicles, and software placed in service after January 19, 2025. This applies to both new and used assets. Immediate write-offs improve cash flow, and the provision is now permanent. It applies to machinery, trailers, tools, and even office tech.
Maximize Section 179 Expensing
The Section 179 deduction cap has increased to $2.5 million, with phaseouts starting at $4 million. This is ideal for contractors in states that don’t conform to bonus depreciation rules. Use Section 179 for asset-by-asset elections and combine it with bonus depreciation for strategic flexibility.
Time Your Projects Strategically
The bill expands exemptions for residential construction contracts, allowing more contractors to use the completed contract method instead of percentage-of-completion. This defers income and taxes until the project is finished. Builders of multifamily housing, senior living, student housing, and mixed-use developments qualify. Subcontractors on qualifying projects may also benefit.
Deduct Domestic R&D Immediately
Contractors investing in innovative designs, materials, or construction methods can now deduct domestic research and experimental expenses in the year incurred. Small businesses with gross receipts under $31 million can amend prior returns for 2022–2024. Catch-up deductions are available in 2025 or can be spread over 2025–2026.
Review Your Entity Structure
The Qualified Business Income (QBI) deduction for pass-through entities is now permanent. S corps, partnerships, and sole proprietors can continue to deduct up to 20% of eligible income. Revisit your entity type with a CPA to ensure you’re maximizing QBI and minimizing exposure.
Prepare for Clean Energy Credit Phaseouts
If your business is involved in solar, energy-efficient building materials, or green infrastructure, note that many clean energy tax incentives are being phased out. Review contracts and bids tied to renewable energy and adjust pricing and timelines to mitigate tax exposure.
Traverse City Contractor Tax Planning Checklist – Fall/Winter 2025
Asset & Equipment Planning
- Purchase qualifying equipment before December 31 to claim 100% bonus depreciation
- Review Section 179 limits and elect asset-by-asset expensing
- Update fixed asset schedules and ensure proper documentation
Project & Income Timing
- Evaluate eligibility for completed contract method on residential projects
- Consider deferring income on late-year contracts to 2026
- Accelerate expenses where possible to reduce 2025 taxable income
Entity & Structure Optimization
- Reassess entity type for QBI optimization (S corp, partnership, sole prop)
- Confirm reasonable compensation for S corp owners
- Review ownership changes or succession plans
Innovation & R&D Deductions
- Identify domestic R&D activities for immediate deduction
- Amend prior returns (2022–2024) if eligible for catch-up deductions
- Document experimental design, materials, or process improvements
Cash Flow & Tax Payments
- Review estimated tax payments and adjust Q4 if needed
- Forecast cash flow for Q1 2026 based on project pipeline
- Consider year-end bonuses or profit-sharing distributions
Clean Energy & Credits
- Review contracts tied to solar or energy-efficient materials
- Adjust pricing or timelines to account for credit phaseouts
- Explore remaining incentives before they sunset
Financial Reporting & Year-End Compliance
- Prepare GAAP-compliant financials for lenders or investors
- Reconcile books and close out 2025 cleanly
- Schedule year-end CPA review or advisory session
Final Thoughts
Traverse City’s construction economy is growing—and so are the opportunities to plan smarter. The One Big Beautiful Bill is more than a tax update—it’s a strategic lever for contractors ready to build wealth and resilience. Let’s talk about how your business can benefit.
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