Tax Implications for the Construction Industry After 2024 Election

Following Donald Trump's 2024 election win, the construction industry faces a potentially transformative period, shaped by the new administration's planned tax policies. With proposed corporate tax cuts, significant incentives for domestic production, and shifts in environmental policy, construction firms could experience both new opportunities and challenges.

Enhanced bonus depreciation for immediate tax savings

The new administration’s policy priorities include reintroducing 100% bonus depreciation, allowing construction companies to immediately deduct the full cost of large capital investments like machinery and equipment. This measure could stimulate investment for construction firms looking to modernize or expand their operations. By increasing upfront cash flow, these tax changes could allow your company to reinvest in productivity-enhancing technology and equipment.

Tariffs on imported goods and increased material costs

With the new administration’s proposed plan to introduce new tariffs and raise existing tariffs on imported goods, including a 10% to 20% tariff on general imports and potentially 60% or greater on Chinese goods, construction firms relying on imported materials may face higher costs. Key materials such as steel, aluminum, and lumber — often sourced internationally — could see price hikes, pressuring profit margins and potentially raising project costs for clients.

Construction companies may respond by seeking alternative domestic sources or adjusting project pricing strategies to absorb increased expenses.

Preservation of the qualified business income (QBI) deduction

The administration’s suggested plan to extend the qualified business income (QBI) deduction — scheduled to expire in 2025 — could offer significant tax savings opportunities for small- to mid-sized construction firms operating as pass-through entities. Making this deduction permanent would allow these businesses to continue to deduct up to 20% of their QBI, potentially providing substantial tax relief.

Reduced focus on environmental tax credits

The administration is also suggesting plans to scale back the clean-energy tax credits introduced in the Inflation Reduction Act. These credits previously incentivized sustainable building practices, making renewable energy and environmentally focused construction more financially attractive.

With the potential rollback of these credits, construction companies may need to rethink strategies centered around sustainability as these projects may no longer come with the same tax benefits.

Strategic outlook for the construction industry

The construction industry could benefit from the Trump administration’s proposed lower corporate tax rates and enhanced depreciation options. However, these benefits come with challenges such as potentially higher import costs and fewer incentives for green initiatives.

To navigate this landscape, assess the costs and benefits of the new tax policies. This includes leveraging domestic production incentives while managing the potential for increased material costs and reduced support for sustainable projects.

Stay informed and consult your tax advisor to proactively develop a sound tax strategy in response to evolving regulatory changes.