The One Big Beautiful Bill Act includes provisions that change residential and home contracts and will affect the construction industry.
What Changed?
- IRC 460: More residential contracts are now exempt from IRC 460.
- Code change: The previous “home construction contracts” code is now “residential construction contracts.”
- Dwelling unit restriction: A residential construction contract is no longer limited to four or fewer dwelling units.
- Expected construction period: The expected construction period to qualify for the exemption was changed from two to three years.
What Does This Mean for You?
- Cut-off basis: The change is made on a cut-off basis for contracts entered after 7/4/25.
- 70/30 method: These changes may affect contractors who use the 70/30 method if their contracts are expected to last more than 3 years.
- Previously, contracts for residential buildings with more than four dwelling units were able to use the percentage-of-completion method for 70% and the exempt method for 30%.
Planning Opportunities
- Accounting method: Contractors with more than four dwelling units (e.g., apartment complexes) have the opportunity to change their accounting methods for new contracts under these changes.
If you have questions about how the OBBBA will affect you and your construction business, RKL is here to help you navigate these changes. Contact us today!
