Construction Industry Conference - Virtual-6 - Lundy

6 - Lundy - Construction-Tax-Update

Pdf Summary

The presentation outlines tax-planning strategies for construction contractors, emphasizing that accounting methods and tax elections should reflect the type of work performed.<br /><br />Key topics include choosing appropriate methods for long-term contracts and using exemptions from percentage-of-completion (POC) accounting where eligible. Home and certain residential construction contracts may qualify, while the presentation notes expanded rules for contracts beginning in tax years after July 4, 2025. Contractors may also change accounting methods through prescribed procedures and deadlines. For contracts still subject to POC, cost allocations may need to include additional direct and indirect costs, affecting estimated costs and look-back calculations.<br /><br />Other planning opportunities include using Section 179 expensing, bonus depreciation, and repair-and-maintenance rules; reviewing owner wages and year-end bonuses; and maximizing the Qualified Business Income deduction. The presentation also recommends considering research and development credits, energy-efficiency incentives under Sections 179D and 45L, and the Work Opportunity Tax Credit, while noting relevant expiration dates.<br /><br />Contractors should evaluate state pass-through entity tax elections and compare corporate with pass-through structures. They should also plan for look-back tax filings on completed POC contracts and assess business-interest limitations, including changes to the adjusted taxable income calculation.<br /><br />Overall, the central message is to review accounting methods, contract classifications, cost allocations, credits, deductions, and entity structures proactively, with attention to eligibility rules, deadlines, and documentation.

Keywords

construction contractors

tax planning

long-term contracts

percentage-of-completion

accounting methods

Section 179

bonus depreciation

Qualified Business Income deduction

tax credits

entity structure