Shawn T. Layo, CPA, Dannible & McKee, LLP
Donald Trump’s victory in the 2024 presidential election has revived discussions about potential tax policy shifts his administration could implement. Many provisions from the 2017 Tax Cuts and Jobs Act (TCJA), President-Elect Trump’s major tax code overhaul signed into law during his first presidency, are set to expire at the end of 2025.
With his reelection, Trump has signaled a commitment to extending and building upon these reforms, potentially introducing new measures designed to lower costs, incentivize investments and spur job creation within industries aligned with his infrastructure-focused agenda.
Most contractors are familiar with the Qualified Business Income (QBI) deduction, also known as Section 199A, which has allowed owners of pass-through entities to deduct up to 20% of qualified business income. This provision, which originated with the TCJA, has been a substantial benefit for pass-through companies by serving as a 20% deduction from taxable income passed through to partners and shareholders. It is currently scheduled to expire on December 31, 2025. With Trump’s potential push to extend or enhance tax cuts, the QBI deduction could be preserved, further easing financial pressures on small and mid-sized construction businesses.
Another significant component of the TCJA that has already begun to phase out is bonus depreciation for qualified property, such as heavy construction equipment. For assets placed in service from September 28, 2017, through December 31, 2022, contractors and other businesses were allowed to take 100% bonus depreciation. This has been a huge benefit for companies. Unlike Section 179 expensing, bonus depreciation can be used to create a loss. However, this provision began to sunset in 2023, with bonus depreciation decreasing to 80% for assets placed in service during 2023 and 60% during 2024. If not extended, bonus depreciation will continue to decrease by 20% each year and eventually expire entirely at the end of 2026. Trump’s return to office could result in the extension or expansion of these provisions, enabling construction companies to modernize their operations without incurring sizable upfront tax liabilities.
Corporate tax rates also remain a topic of discussion. Before the TCJA, corporate tax was calculated on a progressive basis, with a maximum tax rate of 35%. Post TCJA, corporations are now taxed at a flat rate of 21% which was made permanent and is not expiring. While there is no specific proposal currently regarding the corporate rate, Trump has suggested reducing it to 20% or possibly even lower for companies that make their products in the United States.
Infrastructure development has long been a cornerstone of Trump’s platform. His administration is expected to push for significant federal spending on roads, bridges, and other critical projects. Tax policies may be structured to incentivize private-sector participation, such as offering tax credits for companies engaging in public-private partnerships.
Furthermore, the administration could introduce targeted tax breaks for companies sourcing materials domestically, benefiting companies that rely on U.S.-produced steel, concrete and other construction inputs.
While many of these potential tax changes could positively impact construction companies, such tax cuts would likely need to be offset by revenue-generating measures. Trump has proposed steep tariffs on foreign-manufactured goods, which may increase the cost of imported materials such as steel and aluminum. Construction companies would need to account for these potential price increases when budgeting for projects.
Undoubtedly, 2025 will be a year full of proposed major tax legislation changes. Trump’s presidency could create a favorable environment for construction companies to expand and thrive. However, companies must remain vigilant about balancing potential benefits with challenges like rising material costs or fluctuating federal budgets. Staying informed and engaging in proactive tax planning will be crucial for businesses seeking to maximize opportunities under the new administration.
Shawn T. Layo, CPA, is a tax partner at Dannible & McKee, LLP, a public accounting firm with offices in Syracuse, Auburn, Binghamton and Schenectady, NY, and Tampa, FL. The firm has specialized in providing tax, audit, accounting and advisory services since its inception in 1978. For more information on this topic, you may contact Shawn at slayo@dmcpas.com or (315) 472-9127.