Following Donald Trump’s 2024 election win, the construction industry is bracing for significant changes driven by the new administration's tax policies. These initiatives include proposed corporate tax cuts, domestic production incentives, and adjustments to environmental regulations, presenting a mix of opportunities and challenges for industry stakeholders.

Enhanced bonus depreciation for immediate tax savings

‍The administration plans to reinstate 100% bonus depreciation, allowing construction companies to fully deduct the cost of significant capital investments like machinery and equipment in the year of purchase. This policy could encourage modernization and expansion efforts, improving cash flow and enabling reinvestment in cutting-edge technologies to enhance operational productivity.

Tariffs on imported goods and increased material costs‍

A proposed tariff increase, including a 10%-20% tariff on general imports and up to 60% or more on Chinese goods, could significantly affect material costs for construction companies. Critical materials such as steel, aluminum, and lumber are often imported, and higher prices may strain profit margins and increase project expenses for clients.

Construction companies may respond by exploring domestic material sources or restructuring pricing models to offset increased costs.

Preservation of the qualified business income (QBI) deduction

‍The administration’s plan to extend the QBI deduction beyond 2025 offers substantial tax savings for small and mid-sized construction firms. By continuing to deduct up to 20% of their qualified income, pass-through entities could gain vital relief, supporting business growth and financial stability.

Reduced focus on environmental tax credits‍

Scaling back clean-energy tax credits from the Inflation Reduction Act could diminish incentives for sustainable building projects. Without these credits, renewable energy and environmentally conscious initiatives might lose financial appeal, prompting firms to reconsider strategies for eco-friendly construction.

Perspective from Construction Owners

‍Many construction business owners are expressing a mix of optimism and concern regarding these proposed policies. While tax cuts and bonus depreciation could create opportunities for growth and reinvestment, rising material costs pose a significant challenge. “The tariffs could hit us hard, especially for projects that heavily depend on imported steel,” said a mid-sized construction firm owner. Others see potential in domestic sourcing initiatives but worry about the impact of losing green building incentives on long-term sustainability goals. Balancing these dynamics will require careful planning and adaptability.

Strategic outlook for the construction industry

‍Trump’s proposed tax policies could offer significant benefits through reduced corporate tax rates and enhanced depreciation options. However, the potential rise in material costs and reduced emphasis on environmental incentives underscores the need for strategic adaptability.

Construction firms should evaluate how best to leverage domestic production incentives while preparing for higher costs and potential shifts in market demand for sustainable projects.