OBBBA Changed the Game for Residential Contractors. Did You Catch It?

OBBBA Changed the Game for Residential Contractors. Did You Catch It?

by Bradley McDougald, EA Feb 10, 2026

| Share

The One Big Beautiful Bill Act (OBBBA) introduced a quiet but meaningful shift in how many residential contractors can recognize income, and for some, it changes the timing of taxes in a big way.

Under prior rules, many residential construction projects were required to recognize income as work progressed using the percentage-of-completion method. OBBBA expands when contractors can instead use the completed contract method, allowing income to be recognized when a project is finished rather than spread over the build.

For contractors, that timing difference matters. Recognizing income later can defer tax payments and help preserve cash during the most capital-intensive phases of a project.

The impact doesn’t stop with general contractors. Certain subcontractors such as plumbers, electricians, and carpenters may also benefit when at least 80% of their contract costs relate to qualifying residential projects. In those cases, the cash-flow advantage can extend across the entire job.

Before OBBBA, the long-term contract exemption was largely limited to “home construction contracts,” generally defined as projects with four or fewer dwelling units. That narrow definition excluded many larger residential developments. OBBBA replaces it with the broader concept of “residential construction contracts,” opening eligibility to a much wider range of projects.

As a result, contractors and developers working on apartments, condominiums, senior living facilities, and other multi-unit residential properties may now qualify for treatment that was previously unavailable to them.

For many in the residential construction space, this change represents one of the most significant shifts in tax timing in recent years. It has the potential to reshape revenue recognition decisions, improve cash-flow flexibility, and give business owners more control over when tax liabilities arise.

Understanding how these rules apply to your specific projects is key.  For those who qualify, OBBBA may offer opportunities that simply didn’t exist before.