Adopting The Completed Contract Method Under The One Big Beautiful Bill Act: Key Benefits & Pitfalls To Avoid For Residential Projects
The One Big Beautiful Bill Act (OBBBA), passed in July 2025, delivered a major, contractor-friendly reform by expanding eligibility to use the completed contract method (CCM) for residential construction contracts, regardless of contractor size. This method allows income deferral until substantial project completion, improving tax cash flow and simplifying compliance.
Previously, only homebuilding contracts (four or fewer units) or small contractors meeting strict revenue and two-year completion rules could use CCM. Most residential projects, such as apartments and condos, were required to use percentage-of-completion methods. Under OBBBA, any qualifying residential construction contract, where at least 80% of costs relate to residential projects like apartments, condos, senior living, student housing, prisons, or mixed-use developments, can now utilize the completed contract method.
Read Also: Major Tax Benefit For Residential Contracts Won Through The One Big Beautiful Bill
Seize The Opportunity In Tax Year 2026
Tax year 2026 marks the first full opportunity for calendar-year contractors to capitalize on this powerful tax planning benefit for qualifying residential construction contracts under the new law. To maximize deferral benefits while ensuring full compliance, contractors should act proactively.
Essential Steps To Implement CCM Successfully
- Clearly identify and track residential construction contracts in work-in-progress (WIP) schedules to separate them from non-qualifying projects and substantiate CCM use.
- Establish consistent, well-documented methodologies to confirm that at least 80% of the original estimated project costs qualify as residential construction, a critical eligibility threshold.
- Strengthen budgeting and forecasting to accurately estimate total project profitability and percent complete at year-end, supporting reliable tax projections and cash flow management despite deferred income recognition.
- Reassess estimated tax payments to align liabilities with the new income timing, avoiding overpayments and optimizing working capital.
Partner With GBQ For Confident Compliance & Maximum Benefit
While OBBBA’s changes offer substantial advantages for residential construction contracts, proper implementation requires precise tracking, documentation, and forecasting to avoid compliance risks or missed opportunities. GBQ’s experienced construction industry services team specializes in guiding contractors through these evolving tax rules, helping you adopt the completed contract method effectively and position your business for stronger cash flow and growth.
Contact GBQ’s construction industry services team today to discuss how OBBBA can benefit your residential projects and ensure your accounting methods are optimized for 2026 and beyond.
By Ryan Kilpatrick, CPA, CCIFP, Partner, Tax & Advisory
Looking for more construction industry insights? Check out these resources:
State & Local Taxes: A 2026 Outlook
What The OBBBA Means For Business Tax Planning
