How Trump’s megabill impacts contractors

It’s official: During a July 4 ceremony complete with a bomber jet flyover and fireworks, President Trump signed the ‘big, beautiful bill’ into law, calling it the “greatest victory yet.”

Why it matters: The nearly 900-page bill, ending months of uncertainty, includes a plethora of tax and spending cuts, several of which will have a direct impact on HVAC contractors nationwide.

What’s happening: At the end of this year, a pair of consumer-facing tax credits — Sections 25C and 25D, which allow homeowners to claim up to thousands of dollars a year on their tax returns for installing qualifying HVAC equipment — will officially expire.

• The rollbacks, which also include two similar tax credits, mark the “biggest federal pullback from energy efficiency in over a decade,” ACCA noted last week.

Yes, but: Despite the blow, a separate pair of HVAC-focused rebate programs, created under the Inflation Reduction Act, have dodged the chopping block and remain active in 12 states, as Homepros recently reported. 

Meanwhile…

A handful of contractor-friendly proposals are now official: 

Pass-through deduction. Previously set to expire at the end of this year, the bill makes permanent a small business deduction — Section 199A — that allows contractors operating as S-corps, LLCs, and sole proprietorships to exclude up to 20 percent of their qualified earnings from federal income tax.

• The income thresholds have been upped to $75,000 for individuals (previously $50,000) and $150,000 for couples (previously $100,000), enabling more contractors to claim the deduction. 

Bonus depreciation. Businesses will now be able to depreciate the full cost of equipment (and other qualifying assets) acquired after January 19, 2025, in the first year — permanently. 

HVAC-friendly investment accounts. College-focused 529 savings plans have also been expanded, allowing families to use the funds to cover a wide range of workforce-related expenses, including apprenticeships, licensing, and industry-recognized certifications. 

Estate taxes. Business owners will see relief on estate taxes, as the amount of an individual’s assets exempt from federal estate or gift taxes in the case of death or gifting will increase to $15 million ($30 million for couples) starting next year, permanently, and be indexed to inflation going forward. 

Overtime taxes. Employees earning up to $150,000 a year will no longer be required to pay federal income taxes on overtime pay — capped at $12,500 — from tax year 2025 through 2028. For couples, the income limit is $300,000, while the cap is $25,000.

What they’re saying: “You have the biggest tax cut, the biggest spending cut… in American history,” Trump said Friday. 

What else is in the bill