The ‘big, beautiful bill’: What’s in it for contractors

The House of Representatives last week passed a multi-trillion-dollar tax and spending bill, dubbed the “big, beautiful bill,” as part of executing President Trump’s agenda.

Why it matters: The legislation proposes a handful of changes that impact contractors, including key tax incentives. While the bill isn’t yet law, below are five developments to watch as it heads to the Senate. 

HVAC Tax Credits

If signed into law, the bill would end consumers’ ability to claim popular HVAC tax credits, known as Sections 25C and 25D, after this year. 

State of play: Section 25C allows consumers to claim up to $3,200 a year on their tax returns for installing certain air conditioners, heat pumps, and furnaces through 2032, while Section 25D provides a 30 percent credit for installing geothermal heat pumps through the same date. 

The IRS reported that over 3.5 million tax returns claimed the credits for the 2023 tax year, 23 percent of which were for air conditioners and heat pumps.

Small-Biz Deduction 

Currently set to sunset after this year, the legislation proposes expanding and making a small business deduction permanent. 

State of play: Known as Section 199A, the deduction allows contractors operating as S-corps, LLCs, and sole proprietorships to exclude up to 20 percent of qualified earnings from federal income tax — this would jump to 23 percent, permanently.

HVAC-Friendly Investment Accounts

529 savings plans — investment accounts that Americans can tap to cover qualified educational expenses without paying federal taxes — would be expanded to include a wider range of workforce programs. 

State of play: “Families could use these accounts to pay for expenses related to industry-recognized certifications, professional licensing, continuing education, and registered apprenticeships,” ACCA wrote.

Enrollment at vocational-focused schools has grown double-digits for two consecutive years, with HVAC-specific programs seeing a 40 percent increase since 2020. 

(No) Overtime Taxes

Employees earning less than $150,000 a year would no longer be required to pay federal income taxes on overtime pay from tax year 2025 through 2028.

State of play: The proposal would directly affect over 13 million American workers, according to the American Action Forum. 

Estate Taxes

Family-owned contracting businesses would get relief on estate taxes, as the legislation proposes increasing the exemption levels for individuals and making them permanent. 

State of play: Around $13.9 million of an individual’s assets are exempt from federal estate or gift taxes in the case of death or gifting, with the figure set to expire at the end of this year. 

The bill would increase the exemption to $15 million per individual, permanently, allowing it to rise with inflation going forward. 

What’s next: The bill now heads to the Senate, where changes are expected, with Congress aiming to deliver a final version to Trump’s desk by July 4.