Tax Law Changes Every Construction and Real Estate Leader Should Be Watching in 2025–2026

Recent legislation, part of the One Big Beautiful Bill Act (OBBBA), introduced several tax changes that will directly affect how construction and real estate companies plan, build, and report. For contractors, developers, property investors, and residential builders, understanding these shifts early is essential. It will help protect margins, avoid missed opportunities, and support better long-term planning.

Below is a clear, straightforward overview of what’s changing, which incentives are ending, and the steps industry leaders should take now to protect their investments.

Key Energy-Efficiency Tax Incentives Approaching Their End

Several energy-efficiency incentives that have been part of project planning for years are scheduled to expire sooner than expected. Timing will be an essential consideration moving forward so that the benefits are not lost. This includes:

179D Energy Efficient Commercial Buildings Deduction

179D is a deduction that allows certain energy-efficient improvements in commercial or large residential buildings to be written off much faster than the standard 27.5- or 39-year depreciation schedules. This deduction is available only for projects that begin construction by June 30, 2026. Projects that start construction after that date will not qualify under the current law. 

45L Energy Efficient Residential Credit

45L is a federal credit that reduces tax liability for builders and developers by offering a per-unit credit for new homes or multifamily units that meet defined energy-efficiency standards. The law allows eligible units to generate a direct dollar-for-dollar tax credit, rather than a slower write-off or depreciation schedule. The 45L credit currently applies to qualified new energy-efficient homes and multifamily units that are acquired before July 1, 2026.  Multifamily developers and homebuilders should evaluate timelines to confirm whether projects still fall within the qualifying window.

Expiration of Additional Energy-Related Credits

Wind and solar credits allow developers to claim a tax credit equal to a percentage of the project’s cost (ITC) or the electricity it produces (PTC). These provisions were structured to accelerate investment by turning a portion of project costs into an immediate tax benefit, reducing the capital required, and improving project feasibility compared to relying solely on long-term depreciation. Several of these credits are also being phased out or terminated earlier than planned. These reductions will influence project costs and ROI for energy-related developments.

A New Completed Contract Method (CCM) Reporting Opportunity for Residential Contractors

There is one meaningful change that may help many contractors. Beginning with tax years after July 4, 2025, residential construction contractors can elect to use the completed contract method (CCM) for reporting gross profit.

CCM can streamline reporting and may improve cash flow for long-term projects, depending on contract structure and timing. Contractors should determine whether this change aligns well with their existing accounting methods.

How To Maximize Remaining Tax Benefits

Although some incentives are expiring, there are still opportunities to capture value with proper planning. Strategic timing and documentation will be critical. This includes evaluating whether:

• Current projects still qualify for 100% bonus depreciation
• Timelines can be adjusted so projects meet the “begin construction” rules for 179D or 45L
• CCM adoption would create cash-flow advantages
• Upcoming work can be accelerated or restructured to preserve tax benefits

What Construction and Real Estate Leaders Should Do Next

1. Review all deadlines and qualifications. Map out each project, identify which incentives apply, and determine whether you can still meet the cutoff dates.
2. Contact your CPA or tax advisor early. Each project has unique variables. The sooner you walk through your situation, the more options you have to plan effectively.
3. Use a checklist or tracking tool. Creating a centralized reference for deadlines, documentation requirements, and eligibility tests ensures nothing falls through the cracks.

Why Staying Ahead Matters

Margins across construction and real estate are already under a lot of pressure. When tax incentives change, the financial impact can be felt across bids, project viability, long-term planning, and cash flow. Companies that address these changes early gain a significant advantage and avoid being caught off guard.

Next Steps

Our team at Redpath has prepared a simple checklist that construction and real estate leaders can use to stay organized and ahead of approaching deadlines. 

If you want help evaluating your current projects or understanding how these changes affect your tax position, we’re here to provide proactive guidance and clarity at every step. Contact us today to start a conversation.