The One Big Beautiful Bill Act (OBBBA)

Big changes are coming to taxes because of a new law called the One Big Beautiful Bill Act (OBBBA). It was signed on July 4, 2025. Some changes start right away with your 2025 taxes (filed in 2026). Others will start in 2026 and later.

The law makes some of the 2017 Trump tax rules permanent, like the bigger standard deduction and current tax rates. It also adds new deductions and credits, and it takes away some old ones.

Here’s what it means for construction contractors.

Tax rules that remain the same

• Vehicles used for business are still deductible through depreciation or mileage, so no changes here.

• If you run a construction business, Section 179 and bonus depreciation are still available, though bonus depreciation continues to phase down. Contractors should plan large purchases around this timeline to maximize write-offs.

• Tools & small equipment are still fully deductible in most cases, but receipts and proof of business use are more important than ever with IRS audits rising.

Tax Changes Starting in 2025

1. Bigger Standard Deduction This is the amount you can subtract from your income before taxes. The numbers went up:

• Single: $15,750

• Head of Household: $23,625

• Married Filing Joint: $31,500

Most people will see less of their income taxed.

2. No More Personal Exemptions You can’t claim yourself, your spouse, or dependents as exemptions anymore. That rule is gone for good.

3. Same Tax Brackets, Now Permanent The tax rates from the 2017 tax law stay in place: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

4. Special Breaks (2025–2028)

• Overtime Pay: Your team can deduct up to $12,500 (single) or $25,000 (married).

• Car Loan Interest: Deduct up to $10,000 of loan interest if the car was built in the U.S. This is separate from a business deduction. It is an itemization on your personal tax return. Contractors should pay close attention to the car loan interest deduction under the OBBBA rules. Work trucks and vans for your contracting business are still handled under business depreciation and mileage rules, not this car loan rule.

5. SALT Deduction Raised If you itemize deductions, you can write off more of your state and local taxes. The new cap is $40,000 (for incomes under $500,000).

6. Child and Family Credits

• Child Tax Credit: $2,200 per child (permanent)

• Other Dependents: $500 credit stays.

• Adoption Credit: Up to $5,000 can now be refunded back to you.

7. Education Savings (529 Plans) Contractors can now use 529 plan funds for trade programs, testing fees, and continuing education (starting in 2025), and you can use up to $20,000 for K–12 costs, like books or tutoring for your kids.

8. Clean Energy Credits End No more tax breaks for solar panels, energy upgrades, or electric vehicles after September 30, 2025. If you are considering an electric truck or van, you must buy before September ends to claim the credit. After that, no EV or clean fuel credits will be applicable.

Tax Changes Starting in 2026

1. Trump Child Savings Accounts

• 1. 1. Parents can put away up to $5,000 a year for kids under 18. $2500 funded by the parent and $2500 funded by an employer.

     2. Babies born between 2025–2028 get a free $1,000 deposit from the government in their Trump Child Savings Accounts.

2. Bigger Child & Dependent Care Credit Covers up to 50% of child care costs. Phases out slowly as income goes up.

3. Student Loans & Education Credits

• • • Employers can help pay up to $5,250 toward student loans, tax-free.

    • If loans are canceled because of disability or death, you won’t be taxed on it.

4. Mortgage Interest Deduction The $750,000 loan cap is permanent. PMI (private mortgage insurance) can now count as interest.

5. Charitable Giving Even if you don’t itemize, you can deduct:

• • • $1,000 if single

    • $2,000 if married filing joint

6. Cash Flow & Compliance

• Contractors sending money outside the U.S. will face a 1% tax starting in 2026.

• The reporting threshold rises in 2026, but contractors still need to track payments made to subs and vendors. Clean 1099 reporting will matter more with IRS tightening audits.

Tax rules are changing fast, and some only last a few years.The One Big Beautiful Bill Act brings some of the biggest shifts we’ve seen since 2017. For contractors, tax on foreign transfers, trade school, vehicles, equipment, family credits, and 1099 reporting rules will all matter. What helps you now may not help later. The best move is to plan ahead each year so you don’t miss out on savings.

If you’re unsure how these 2025 tax changes for contractors affect you or your construction business, let’s talk. I’ll help you figure out the best way to keep more of your money and avoid surprises.

Contractor FAQs

Q: Can I still deduct my truck or work vehicle? Yes. Work trucks, vans, and equipment are still deductible through mileage or depreciation. The new $10,000 car loan interest deduction is for personal-use vehicles, not work vehicles.

Q: Did depreciation rules change? No. You can still use Section 179 and bonus depreciation. Bonus depreciation is shrinking over time, so plan big purchases wisely.

Q: What about trade school or certification programs? Yes. You can now use 529 plan money for trade school, testing, or certifications. Education credits like the Lifetime Learning Credit are still available, but starting in 2026 you must list the school’s EIN.

Q: Are clean energy credits still around for work vehicles? No. Credits for electric and clean fuel vehicles end after September 30, 2025.

Q: Can I deduct gas, repairs, and mileage for my work truck? Yes. Business expenses for mileage, gas, insurance, and repairs are still deductible.

Q: Is the car loan interest deduction the same as the standard deduction? No. The standard deduction is what everyone can claim to lower their taxable income. The car loan interest deduction is separate and only applies if you qualify.

Q: Can I still deduct work clothes or safety gear? Yes. Hard hats, boots, uniforms, and safety equipment are still considered business expenses. The new law does not change that.

Q: What about home office deductions? The rules for home offices did not change. If you qualify, you can still deduct part of your home costs for the space you use only for business.

Q: Does the law change how I pay my subcontractors? No. You still issue 1099s. The only change is that starting in 2026, the reporting threshold for 1099-NEC and some 1099-MISC forms rises from $600 to $2,000.

Q: Are charitable donations still deductible? Yes. In 2026, even people who take the standard deduction can claim up to $1,000 (single) or $2,000 (married) for cash donations.

Q: Will my kids’ trade school be covered? Yes. Starting in 2025, 529 plan funds can be used for trade schools, books, tutoring, and even testing fees for job certifications.

Q: Do these changes affect my business entity (LLC, S Corp, C Corp)? No direct changes yet. But the new law mainly affects personal income taxes, credits, and deductions. Business-level tax rules remain the same.

About the Author

Amealia Smith, EA, ABA, is a Fractional CFO and Tax Strategist to construction contractors. She helps them keep cash in the bank, reduce IRS debt, and get out of survival mode, without hiring a full-time CFO.

She's helping roofing and general contracting companies from $500K to $20M stop the cash bleed and get out of the rat race.

💻 Visit: www.savvyaccountingbiz.com

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