Category: CSB News

Kirsten Sokom Named Shareholder at Crow Shields Bailey

After more than a decade of service, leadership, and commitment to quality, Kirsten Sokom has been named a Shareholder at Crow Shields Bailey. In this interview, Kirsten reflects on her career path, professional milestones, leadership philosophy, and the relationships that have shaped her journey.

What is your favorite thing about working at CSB?

I get joy out of working with our clients. Every client is different, and every engagement is different. Not knowing what is around the corner or what you might be working on next week keeps the work interesting and meaningful.

There are several clients I have worked with since I first joined the firm 12 years ago. Being able to build those long-term relationships over that time is something I am really proud of.

Can you share a memorable experience or challenge from your journey in the accounting profession?

Between 2019 and 2024, the accounting profession experienced significant change, particularly from an audit perspective. We were navigating new accounting standards back to back, including revenue recognition, lease accounting, and credit losses.

Looking back, that period was pivotal in my career. I had to dive in, gain a deep understanding of the standards, and develop the technical expertise needed to guide clients through those changes. That experience ultimately helped prepare me to step into the quality management partner role when Colleen retired.

Were these typical updates, or larger-than-usual changes?

They were much larger than standard updates. I was especially involved with the lease accounting standard. We met with local banks to walk through how financial statements and disclosures would change, and we even hosted a seminar for our audit and assurance clients that was very well attended.

That experience was not only technical, but it also helped me develop presentation skills. Getting in front of a large group and explaining complex accounting changes is something you do not always get to do day to day, and it pushed me professionally.

If you could go back, what would you tell yourself as a staff member?

I would tell myself to develop relationships earlier in my career.

In the first half of my career, I truly believed I could do everything on my own. It was not until I reached the manager level that I realized that mindset was not sustainable. I am the oldest of three, the first in my family to go to college, earn a master’s degree, and pursue a professional certification. I was very used to relying on myself and pushing forward.

What I eventually realized is that at CSB, you are part of a team. You do not have to do everything alone. While I had spent years building strong client relationships, I later recognized the importance of cultivating internal relationships with our team as well.

I would encourage students, interns, and those early in their careers to show up, have conversations, and build connections. In a world that is increasingly digital, those interpersonal skills can truly set you apart and serve you well throughout your career.

Outside of work, what are some of your passions or hobbies?

I love to travel. My family and I enjoy traveling internationally, and when we stay domestic, we are working our way through the national parks. We like to mix it up and keep things balanced.

Our kids are four and seven, and they are great travelers. I even rope my son into helping plan trips, narrowing down destinations and being part of the process. It makes travel more fun and meaningful for all of us.

What aspect of the accounting industry excites you the most right now?

There is a lot of discussion in our profession about AI and automation, and I am very curious to see where it all goes. It is an exciting time, and while not every tool will stick, the impact is here to stay.

At the firm level, we are already seeing benefits on the tax side, and from an audit perspective, we are evaluating tools and preparing for what comes next. I believe we are on the precipice of something really impactful.

What qualities make an accountant successful?

Curiosity is key. Being comfortable asking questions when something does not look right is essential.

Attention to detail is also critical, as it directly impacts the accuracy and quality of your work. Lastly, integrity matters deeply. From an audit perspective, professional skepticism and objectivity are fundamental. We are serving the public interest, and that responsibility must always come first.

What qualities make a successful leader?

Curiosity still plays an important role, especially when it comes to vision and growth. Leaders should be willing to ask questions and think forward.

Equally important are the ability to listen, ownership, and follow-through. Understanding that responsibility ultimately rests with you is a key part of leadership.

What professional achievements are you most proud of?

Pursuing and completing the CPA exam is a major milestone for me. I began taking the exam during my final semester of my master’s program and passed all four parts on the first try. Having those three letters behind your name opens doors and creates opportunities that make a real difference.

Another milestone was becoming the quality management partner for the audit and assurance practice following Colleen’s retirement. Quality is something we take great pride in at CSB, and being trusted with that responsibility means a great deal to me.

And of course, being named Shareholder is the most meaningful achievement. I am incredibly proud to have earned the confidence of the shareholder group and grateful for the mentors, teachers, and family who supported me along the way.

When did becoming a Shareholder become a goal for you?

When I first entered public accounting, becoming a shareholder was not necessarily the goal. I chose public accounting because I wanted variety and challenge.

It was probably around year eight or nine that those conversations began with my mentor, and I realized it was a very real possibility. From there, it became something I worked intentionally toward.

How do your personal values align with CSB’s values?

One of CSB’s core values is family, and that resonates deeply with me. As a working mother of two young children, being able to integrate work and life matters.

I am grateful for the flexibility to be present for school pickups, class events, and family time. It is not a perfect balance, but CSB has allowed me to pursue a meaningful career while being present for what matters most outside of work.

Looking back, how would you describe your path to Shareholder?

I joined CSB in 2013, when the firm was much smaller. Early in my career, I had exposure to audit, tax, and client accounting work. That broad experience gave me a strong foundation and perspective.

Over time, I began focusing more heavily on audit and assurance, and later became more involved in quality management, working closely with Colleen before her retirement. Having the opportunity to shadow her and learn the role firsthand gave me confidence stepping into that responsibility.

That progression, combined with exposure across multiple areas of the firm, has helped shape how I serve clients and lead today.

How did you originally choose accounting as a career?

Accounting was not a family profession for me. In high school, I initially wanted to be a certified financial planner, but graduating in 2008 during the recession shifted my thinking.

I took a bookkeeping class, worked at a local CPA firm one summer, and later worked in grants and contracts accounting while in college. Those experiences confirmed that accounting was the right path for me.

I joined CSB after meeting the team through Meet the Firms and a series of interviews. Looking back, every step along the way helped prepare me for where I am today.

Write-Offs That Work: Depreciation Tactics Contractors Can’t Afford to Miss

Depreciation is one of the most effective tax planning tools available to contractors. However, the rules for tax depreciation differ from those used for financial reporting, and understanding these differences is key to maximizing your deductions.

Book vs. Tax Depreciation: What’s the Difference?

Book depreciation is used for financial statements and follows Generally Accepted Accounting Principles (GAAP). It typically uses the straight-line method, spreading the cost of an asset evenly over its estimated useful life, as determined by management based on factors like expected usage, manufacturer guidelines, and industry norms. The goal is to match expenses with the actual use of the asset.

Tax depreciation, on the other hand, is governed by IRS rules. The IRS prescribes specific methods and recovery periods, often allowing for faster write-offs than book depreciation. The primary system used is the Modified Accelerated Cost Recovery System (MACRS), which accelerates deductions in the early years of an asset’s life.

Another common difference is that under GAAP, salvage value represents the estimated residual amount an entity expects to recover at the end of an asset’s useful life, and it is deducted from the depreciable base when calculating depreciation expense. In contrast, tax-basis accounting under the Internal Revenue Code generally assumes no salvage value, allowing the full cost of property and equipment to be depreciated for tax purposes. This difference creates temporary book-tax differences that must be reconciled in financial reporting

Key Tax Depreciation Options for Contractors

1. MACRS (Modified Accelerated Cost Recovery System)

MACRS is the standard method for tax depreciation. It assigns assets to specific classes with set recovery periods and methods:

• Accelerated Methods: Most equipment and vehicles use the 200% or 150% declining balance method, which front-loads deductions.
  • 200% declining balance depreciates an asset at twice the straight-line rate. For example, if an asset has a 5‑year useful life, the straight-line rate is 20% (100% ÷ 5). The 200% declining balance rate is 40% (20% × 2).
  • 150% declining balance depreciates an asset at 1.5 times the straight-line rate.
• Straight-Line Method: Used for buildings (27.5 years for residential rental property, 39 years for commercial property).

Example: A $50,000 excavator (classified as 5‑year property) can generate larger deductions in the early years under MACRS than under straight-line depreciation.

2. Section 179 Expensing

Section 179 allows contractors to immediately expense the cost of qualifying property, up to $2,500,000 in 2025, with a phase-out beginning at $4,000,000 in total purchases. This deduction is limited to taxable business income and is applied before bonus depreciation.

Qualifying property: Most tangible personal property, including machinery, equipment, and certain vehicles.

Vehicles qualify for Section 179 but are subject to specific limits based on the weight and type of vehicle:

• SUVs and Heavy Vehicles: Certain SUVs (GVWR over 6,000 lbs but not more than 14,000 lbs) have a maximum Section 179 deduction of $31,300 for 2025.
• Passenger Automobiles: Includes small cars and SUVs or trucks under 6,000 lbs. Maximum first-year depreciation is $12,200 for 2025.
• Exceptions for Vehicles Over 6,000 lbs: The $31,300 limit does not apply if the vehicle meets one of the following:
  • Large passenger vans or buses (seating more than nine behind the driver).
  • Pickup trucks with a cargo bed at least six feet long (measured from the inside of the closed tailgate to the inside of the bulkhead) and not readily accessible from the passenger compartment.
  • Vehicles with no seating behind the driver and no body section extending more than 30 inches beyond the windshield (e.g., certain box trucks and delivery vans).

3. Bonus Depreciation

Bonus depreciation allows an immediate deduction of a percentage of the cost of eligible property. For 2025:

• 40% bonus depreciation for property placed in service before January 20, 2025.
• 100% bonus depreciation for property acquired after January 19, 2025 (made permanent under OBBBA).
• No annual cap or income limitation.
• Applies to both new and used property (if new to the taxpayer).

Vehicles are eligible for bonus depreciation, but they have specific limits based on weight, similar to Section 179:

• Heavy SUVs (over 6,000 lbs GVWR): Not subject to passenger automobile limits, so 100% bonus depreciation may apply if business-use requirements are met.
• Passenger Automobiles: Includes small cars and SUVs or trucks under 6,000 lbs. Maximum first-year depreciation is $20,200.

4. Alternative Depreciation System (ADS)

Certain property must use ADS, which requires straight-line depreciation over longer periods. This applies to specific assets, including property used predominantly outside the U.S. or when the taxpayer elects ADS.

Special Considerations for Contractors

• Qualified Improvement Property (QIP): Interior improvements to nonresidential buildings may qualify for 15-year depreciation and bonus depreciation unless ADS is required.
• Qualified Production Property (QPP): Some real estate investments may qualify for 100% bonus depreciation if used in a Qualified Production Activity (QPA). Strict timing and use requirements apply. This was part of the One Big Beautiful Bill Act (OBBBA) of 2025 and is meant to encourage domestic manufacturing and production.
• Repairs vs. Capital Improvements: Repairs that do not add significant value or extend the asset’s life may be expensed immediately. Capital improvements must be depreciated.
• De Minimis Safe Harbor: Items costing $2,500 or less ($5,000 with audited financials) may be expensed if a written policy is in place.
• Materials and Supplies: Items costing $200 or less, or with a useful life of 12 months or less, are generally expensed when used.

Depreciation Recapture

Because tax depreciation is typically accelerated, your tax basis is often much lower than your book basis. When an asset is sold, this difference can result in a higher taxable gain than what appears on financial statements. Additionally, depreciation claimed for tax purposes is subject to recapture, meaning the gain up to the amount of depreciation taken is taxed at ordinary income rates, not lower capital gains rates. Depreciation recapture applies to all depreciation taken on personal property and land improvements and applies to any depreciation in excess of straight-line for real property.

Example:
You buy equipment for $100,000. After three years, you’ve taken $71,200 in tax depreciation but only $30,000 in book depreciation. You sell the equipment for $70,000.

• Book value = $70,000 → $0 book gain
• Tax basis = $28,800 → $41,200 taxable gain (all ordinary income due to recapture)

Planning Tips for Contractors

• Timing Matters: The year an asset is placed in service determines the available bonus depreciation rate.
• Cost Segregation: A study can identify building components eligible for shorter recovery periods and bonus depreciation.
• State Tax Differences: Some states do not conform to federal bonus depreciation or Section 179 rules.
• Buy vs. Lease: Depending on your situation, either buying or leasing may offer better financial benefits.
• Debt Restructuring: Refinancing or renegotiating loan terms may improve cash flow and lower interest expense.

Conclusion

Contractors have several powerful ways to accelerate depreciation and reduce their tax bills, but the right strategy depends on the asset, timing, and overall tax situation. With recent changes to bonus depreciation and other rules, careful planning is essential. We also help contractors restructure debt to improve cash flow and strengthen their financial position. Before making any decisions, give us a call—we can guide you toward effective tax and debt‑saving strategies.

How Gulf Coast Contractors Use Financial Stability and Insurance Strategy to Grow Their Business

By Zach Schneider, Schneider Insurance

Commercial general contractors across the Gulf Coast are operating in one of the most active construction markets we’ve seen in years. With that growth comes larger projects, tighter contract requirements, and an increasing emphasis on financial stability. While contractors often think first about their insurance program, bondability plays an equally critical role. It determines which projects you can pursue and how competitively you can bid.

As commercial opportunities expand, contractors with strong financial foundations paired with appropriate bonding capacity and disciplined insurance practices position themselves for sustainable, profitable growth.

Building Financial Stability: The Foundation of Bonding Capacity

Performance and payment bonds are essential tools for commercial contractors. They reassure project owners and lenders that you have the financial strength, operational discipline, and track record to complete the work as promised. Your ability to secure these bonds is determined by your bonding capacity which is the maximum amount of surety credit a surety company will extend to your business. This represents both the largest single project you can bond and the total dollar value of all bonded work you can carry at one time.

Bonding capacity reflects the overall health of your construction operation. Surety companies evaluate your business comprehensively before extending bonding credit. They review items such as CPA-prepared financial statements, working capital and cash flow and job-costing accuracy. For many general contractors strengthening these financial fundamentals can be the difference between bidding on a $300,000 project and a $3 million project.

How Insurance Strategy Supports Growth

Financial strength is the foundation, but your insurance program also plays a significant role in sustainable growth. A well-structured insurance strategy protects your operation while supporting your ability to pursue larger opportunities. 

Workers’ Compensation Experience Modification Rate

Your experience modification rate (ex-mod) directly impacts your ability to compete for projects and maintain profitability. A high ex-mod increases your Workers’ Compensation premiums, reducing profit margins on every project. More significantly, many project owners require contractors to maintain ex-mods below specific thresholds to qualify for bidding. A high ex-mod can disqualify you from pursuing certain opportunities regardless of your technical capabilities.

Contractors can maintain a favorable ex-mod through timely claim reporting, active return-to-work programs, quarterly loss-run reviews, and thorough subcontractor verification procedures. These practices reduce insurance costs while keeping you eligible for competitive project opportunities.

Comprehensive Risk Management

Beyond Workers’ Compensation, how you manage your overall insurance program signals operational maturity. Consistent coverage, proper documentation, disciplined subcontractor management, and organized policy administration all contribute to a stable risk profile. Strong insurance practices paired with solid financials create a comprehensive picture of a well-managed operation ready for larger opportunities and the bonding capacity needed to pursue them.

The Partnership Approach to Sustainable Growth

Building bonding capacity isn’t a solo effort. It requires coordination between three key partners working toward the same goal.

Your CPA provides the financial foundation through accurate statements, strategic accounting practices, and construction-specific expertise. They help you maintain the work-in-progress schedules, cash flow forecasts, and job costing accuracy that surety companies require. Regular communication between you and your CPA ensures your financial reporting aligns with bonding needs as your business grows.

Your insurance advisor structures coverage that protects your operation while supporting your bonding profile. They help manage your experience mod, coordinate subcontractor certificates, and ensure your insurance program demonstrates the operational discipline surety companies value. The right insurance strategy complements your financial strength rather than creating obstacles to bonding.

Your surety relationship grows stronger when supported by solid financials and appropriate insurance. Surety companies want to partner with contractors who demonstrate stability, discipline, and growth potential. When your CPA and insurance advisor work together to present a comprehensive picture of your operation, securing bonding capacity for larger projects becomes significantly easier.

The Gulf Coast construction market remains highly active, with strong demand across both commercial and residential sectors. As opportunities expand, contractors benefit from working with advisors who understand construction-specific bonding requirements, can coordinate financial and insurance elements efficiently, and remain deeply connected to regional dynamics in Mobile, Gulf Shores, Daphne, and throughout the Alabama coastline.

Key Tax Changes in the One Big Beautiful Bill Act (2025)

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, following narrow passage through Congress. Introduced in May 2025, the bill combines major tax reforms with changes to federal spending, building on the 2017 Tax Cuts and Jobs Act and modifying parts of the Inflation Reduction Act of 2022. You may be wondering what these changes mean for you. Below is a brief summary of key provisions that could affect your tax liability in 2025 and beyond.

For Individuals & Families:

• Lower Tax Rates Made Permanent: The reduced individual tax rates from recent years are now permanent, avoiding a scheduled increase after 2025.
• Higher Standard Deduction: The standard deduction is permanently increased (e.g., $23,625 for heads of household, $15,750 for singles).
• No Return of Personal Exemptions: Personal exemptions remain suspended, but seniors (65+) can claim a new $6,000 deduction through 2028, subject to income limits.
• Child Tax Credit Expanded: The child tax credit is now $2,200 per child, with inflation adjustments and stricter Social Security number requirements.
• State and Local Tax (SALT) Deduction Cap Raised: The SALT deduction cap increases to $40,000 ($20,000 for married filing separately) for 2025, with a phase-down for high incomes, before reverting to $10,000 after 2029.
• No Tax on Tips and Overtime (Temporarily): For 2025–2028, up to $25,000 in tips and $12,500 ($25,000 joint) in overtime pay can be deducted, subject to income phaseouts.
• Car Loan Interest Deduction (Temporarily): Deduct up to $10,000/year in interest on loans for new U.S.-assembled vehicles (2025–2028), with income limits.

For Businesses:

• 100% Bonus Depreciation Made Permanent: Businesses can fully expense qualified property immediately, with no scheduled phase-out.
• Section 179 Expensing Limit Increased: The limit for expensing business assets rises to $2.5 million, with a $4 million phaseout threshold.
• Research & Development (R&D) Expensing Restored: Domestic R&D costs can be fully expensed immediately; foreign R&D must still be amortized over 15 years.
• Qualified Business Income (QBI) Deduction Enhanced: The income threshold for phase-in is raised to $75,000 ($150,000 joint), and a $400 minimum deduction is established for active business income.
• Paid Family and Medical Leave Credit Expanded: The credit is now permanent and includes insurance premiums.
• Exception to Percentage of Completion Method for Residential Construction Contracts: The OBBBA expands the exception under IRC §460(e) to include “residential construction contracts,” not just “home construction contracts.”

Other Notable Changes:

• Estate and Gift Tax Exemption Increased: The exemption is permanently set at $15 million (indexed for inflation) for estates and gifts after 2025.
• Charitable Deductions for Non-Itemizers: Above-the-line charitable deduction increased to $1,000 ($2,000 joint) and made permanent.
• Energy Credits Phased Out: Credits for clean vehicles, residential energy, and other green initiatives are mostly terminated after 2025 or 2026.
• Enhanced Reporting Requirements: The 1099 reporting threshold increases to $2,000 (from $600), and the de minimis threshold for third-party network transactions returns to $20,000/200 transactions.

Temporary and Pilot Programs:

• “Trump Accounts” for Children: New tax-advantaged savings accounts for children under 18, with government-funded pilot contributions for newborns (2025–2028).

This is a high-level overview. Many provisions have specific requirements, phase-ins, or phase-outs. Given the scope of these changes, proactive tax planning is more important than ever. We encourage you to contact our office to discuss how the OBBBA may impact your specific situation and how we can help you plan effectively.

Navigating 2025 Tariff Policies: Impacts on the Construction Industry

As of mid-2025, U.S. tariff policies are undergoing significant changes that are reshaping the construction landscape. For contractors, understanding these shifts is important to managing costs, maintaining project timelines, and staying competitive in a volatile market.

Current Tariff Landscape

The U.S. has implemented a series of aggressive tariff increases under the current administration. Key developments include:

• Tariffs on all steel and aluminum imports, affecting structural materials and fabrication costs. The tariffs imposed in April 2025 were increased effective June 3, 2025, from 25% to 50%.
• 25% tariffs on imports from Mexico and Canada, with limited exemptions under the United States-Mexico-Canada Agreement (USMCA).
• Proposed 25% tariffs on copper and lumber, which are still pending but could significantly affect electrical and framing costs.
• 10% tariffs on potash and energy products, indirectly influencing construction through increased fertilizer and fuel prices.

Impacts on Construction Contractors

Rising Material Costs
Tariffs on steel, aluminum, and lumber have raised prices across the industry. These cost increases may result in diminished profit margins, making it harder to stay within budget.

Supply Chain Disruption
Tariffs have disrupted long-standing supply chains. Contractors may face delays in material deliveries resulting in the need to seek alternative sources.

Project Delays and Budget Overruns
With materials harder to source and more expensive, project timelines are likely to stretch. Contractors should build in contingencies for procurement and pricing volatility, as these factors can complicate client negotiations and contract agreement.

Strategic Shifts in Procurement
Many firms are turning to domestic suppliers. While this can reduce exposure to tariffs, it may also introduce new challenges in terms of capacity, quality, and pricing.

What Contractors Can Do

While some tariffs may be temporary or subject to negotiation, the current trend suggests a protectionist trade environment for the near future. Contractors who adapt quickly and build flexibility into their operations will find themselves better positioned.

A way to facilitate this is with a mid-year financial review, which allows management to assess project profitability, cash flow, and budget performance across ongoing jobs as well as the organization. These factors are often impacted by fluctuating material costs and labor availability. With the added complexity of tariffs on imported construction materials such as steel, aluminum, and lumber, contractors face increased cost volatility. A thorough mid-year check-in helps identify where tariffs may be inflating expenses, enabling contractors to adjust estimates, renegotiate supplier terms, or explore alternative sourcing. This proactive approach ensures better financial control, supports accurate forecasting, and strengthens the contractor’s ability to navigate a dynamic and often unpredictable market.

CSB can provide assistance in this area. Please reach out to your CSB contact to discuss questions or concerns.

The tariffs referenced above reflect tariff policy as of July 15, 2025. Tariffs on these goods may vary due to future changes in tariff policy or based on the specific policies regarding the countries from which the goods are imported.

The Benefits of Fractional CFO Accounting Services for Construction Contractors

Running jobs, managing crews, juggling bids, and trying to stay afloat — and then someone asks for a five-year financial projection.
That’s where a fractional CFO steps in. No suits, no fluff — just solid financial expertise, tailored to your business. Whether you are looking to grow, streamline operations, or simply gain a clearer picture of your finances, this might be the smartest move you haven’t made yet.

What is a Fractional CFO?

A fractional CFO is a part-time financial expert who provides strategic guidance — without the full-time price tag. You get the same knowledge and leadership as a traditional CFO, but on a flexible, as-needed basis. For construction businesses trying to grow, stay lean, or just clean up the financial side of things, this model can be a game changer.

Key Benefits for Construction Contractors

1. Cost-Effective Expertise: Fractional CFOs bring seasoned financial leadership at a fraction of the cost of a full-time CFO. This is especially valuable for small to mid-sized construction firms that need expert advice but cannot justify a full-time executive.
2. Cash Flow Management: Effective cash flow management is vital in construction, where project timelines and payment schedules can be unpredictable. Fractional CFOs can assist with optimizing cash flow, preventing financial bottlenecks and enabling smooth day-to-day operations.
3.  Job Costing and Project Accounting: Accurate job costing and project accounting are essential for profitability. Fractional CFOs oversee these processes, ensuring that projects stay on budget and identifying potential issues early.
4. Strategic Planning: Fractional CFOs provide strategic insights that inform key decisions, such as hiring, marketing spend, and contract negotiations. Their experience across various industries offers unique perspectives that can fuel growth and efficiency.
5. Financial Reporting and Analysis: Routine financial reporting and analysis are crucial for understanding the health of a construction business. Fractional CFOs deliver actionable insights that support informed decisions and long-term planning.
6. Access to Capital: Need financing for a large project or expansion? Fractional CFOs help craft accurate financial projections and present them to lenders or investors, improving your chances of securing funding.
7. Compliance and Risk Management: Navigating complex regulatory environments is part of the construction business. Fractional CFOs help ensure compliance with financial regulations and manage risks related to insurance, bonding, and other financial matters.

Fractional CFO services offer construction contractors a flexible, cost-effective solution to their financial management needs. By providing high-level expertise on a part-time basis, these professionals help firms navigate financial complexities, optimize operations, and drive strategic growth. Whether you’re scaling rapidly or tackling complex projects, a fractional CFO can be a powerful ally in achieving financial stability and long-term success.
Below are a few examples of fractional CFO services that Crow Shields Bailey can provide:

• Bookkeeping cleanup and accounting software customization
• Assistance with preparing contract schedule
• Budgeting and forecasting
• Working capital and cash flow analysis
• Evaluating whether to purchase or lease equipment
• Goal setting and key performance indicators

If you’re interested in learning more about how fractional CFO services can benefit your construction business, please don’t hesitate to contact us. We’re here to help you achieve your financial goals and drive your business forward.

Trump’s Tax Policy in 2025 and Its Impact on Construction Contractors

In 2025, President Trump’s tax policy will likely reflect a blend of previous initiatives, with several potential changes that could impact construction contractors. This article explores what construction contractors can expect from Trump’s tax policy.

Corporate Tax Rates and Pass-Through Entities

One of the most significant aspects of President Trump’s tax policy in recent years has been the reduction in corporate tax rates. Under the Tax Cuts and Jobs Act (TCJA) of 2017, the corporate tax rate was reduced from 35% to 21%. In 2025, contractors operating as corporations will continue to benefit from these lower corporate tax rates. Trump has proposed further reducing the corporate tax rate from the current 21% to 20%.
Furthermore, President Trump has proposed reinstating a form of the Domestic Production Activities Deduction (DPAD) at 28.5%, which effectively lowers the corporate tax rate for domestic producers from 21% to 15%. This deduction, which previously provided tax relief for domestic manufacturing activities but was eliminated under the 2017 tax law.

Changes to pass-through entities, which many construction contractors utilize, will also be of interest. Construction contractors often operate as pass-through entities like S-corporations, LLCs, and partnerships, which allow business income to be taxed at individual tax rates. Under the TCJA, a deduction of up to 20% of qualified business income from pass-through entities was established, commonly referred to as the Qualified Business Income (QBI) deduction. In 2025, this deduction could be expanded or restructured, depending on legislative changes. If the QBI deduction remains intact or increases, many construction contractors will see a favorable tax benefit, especially small and mid-sized companies.
These anticipated changes could provide significant tax savings for construction companies, particularly those involved in domestic manufacturing of construction materials and equipment.

Depreciation and Section 179 Expensing

Construction contractors typically invest heavily in equipment, machinery, and vehicles, which can be expensive. Under the Trump administration’s tax policy, there have been favorable rules surrounding depreciation. One key provision is the Section 179 expensing rule, which allows businesses to deduct the full cost of certain capital expenditures in the year they are purchased rather than depreciating them over several years. In 2025, this provision is expected to remain intact, enabling contractors to quickly write off large equipment purchases, which can significantly improve cash flow. There are limits to the Section 179 deduction. The maximum Section 179 expense that can be taken in 2025 is set to be $1,250,000. This deduction begins to be phased out if purchased property exceeds $3,130,000 in 2025.

Bonus depreciation, which permits immediate deduction of a percentage of qualifying asset purchases, is being phased out under the TCJA provisions. Under current law, in 2024 the deduction will reduce from 80% to 60%. The deduction will drop to 40% in 2025 and sunset after 2026. President Trump has proposed to reinstate the 100% bonus depreciation deduction for new and used assets. This provides contractors with immediate tax benefits when they acquire new construction equipment, and allows for a more flexible and efficient approach to managing large capital investments.

Labor and Employment Tax Considerations

Construction contractors, particularly those who hire a significant workforce, will also be impacted by changes to labor and employment tax policies under Trump’s tax plan in 2025. Efforts to reduce payroll taxes, expand the reach of tax incentives for hiring veterans or disadvantaged workers, and enhance retirement savings options for workers could offer advantages to construction companies.

Additionally, any changes to the tax treatment of independent contractors versus employees could have implications for the industry. Many construction workers are classified as independent contractors and shifts in tax policy regarding how these workers are treated could impact hiring practices, employment classifications, and overall tax liability for contractors.

Tariffs and International Trade

Trump’s tax policy also includes a proposal to impose a universal 20% tariff on all imported goods, with a higher rate of 60% for imports from China. This could have mixed effects on the construction industry:

• Higher Costs for Imported Materials: Construction companies that rely on imported materials may face higher costs, which could impact project budgets and timelines.
• Shift to Domestic Suppliers: The tariffs could encourage a shift towards domestic suppliers, potentially benefiting U.S. manufacturers and reducing supply chain disruptions.

President Trump’s tax policy in 2025 presents a mixed bag for construction contractors. On the one hand, tax cuts and depreciation incentives could offer financial benefits for construction businesses. On the other hand, any changes to capital gains tax, labor regulations, or tax rates could introduce new challenges. Regardless of the policy changes, construction contractors will need to stay informed and adapt their strategies to navigate the evolving tax landscape effectively.

As the holiday season comes to an end, in many cases this can mean your accounting firm will soon be knocking on the door to begin your company’s compilation, review or audit. A few steps taken after year-end can make this process smooth for both parties. Reconciling accounts and posting journal entries prior to providing a trial balance to the engagement team can reduce follow-up questions and proposed adjustments. Communicating any changes in the business or unusual transactions during the year can also assist the engagement team in understanding any fluctuations they identify during the engagement.

For audit engagements, the engagement team will provide testing selections for various areas. Providing timely support for these transactions can keep the engagement moving and avoid delays. Our teams strive to improve efficiency each year and are always open to suggestions. Let your engagement team know if you have ideas that could improve the process. We have implemented Suralink in recent years which provides an online interactive request list. Our clients have found this helpful in tracking items needed throughout the engagement. If we are not using this feature on your engagement and you are interested, ask you contact at CSB and they will be happy to set that up for you.

A smooth engagement ultimately comes down to good communication from both parties. We believe that few items mentioned can help these engagements stay on schedule and provide less inconvenience for you. We look forward to working with our clients in 2025. If you have any questions or concerns, please reach out to you CSB contact.

A Guide for Construction Business Owners

As the expiration of several key provisions of the Tax Cuts and Jobs Act (TCJA) looms, construction business owners must brace for significant tax law changes. The TCJA, enacted in 2017, brought numerous benefits, but many of these are set to expire after 2025, potentially reverting to pre-TCJA levels. Here are the critical areas to watch:

1. Individual Tax Changes

Key individual provisions set to expire include:

• Top Individual Income Tax Rate: Increasing from 37% to 39.6%, which could affect construction business owners’ personal tax liabilities.
• Standard Deductions: The TCJA nearly doubled the standard deduction and eliminated personal exemptions. If the TCJA expires in 2025, the standard deduction for a married couple filing jointly in 2026 could substantially decrease from approximately $30,000 to $13,000 before being indexed for inflation. Meanwhile, the personal exemption is expected to increase to approximately $5,300 per individual. These changes could potentially increase taxable income, making itemizing deductions more advantageous.
• Gift and Estate Tax Exemptions: Reducing significantly, impacting estate planning strategies for family-owned construction businesses.

2. Impact on Pass-Through Entities

The Section 199A deduction, which allows a deduction of up to 20% of qualified business income for pass-through entities, is at risk of expiration. If this deduction sunsets, small businesses will lose the deduction and face higher taxable income, leading to increased tax liabilities for owners of pass-through entities. The increase in the tax liability would require larger tax distributions for owners and thereby reduce the amount of capital available for reinvestment in the business, such as purchasing new equipment, hiring additional staff, or expanding operations.

3. Accelerated Depreciation

Bonus depreciation, which permits immediate deduction of a percentage of qualifying asset purchases, is being phased out. In 2024, the deduction will reduce from 80% to 60%, affecting capital investment strategies. The deduction will drop to 40% in 2025 and sunset after 2026. For construction companies, this means higher upfront costs for purchasing new equipment and machinery, potentially impacting project budgets and timelines. Decisions to delay or reconsider purchasing new equipment due to the reduced immediate tax benefits could impact the overall productivity and efficiency of operations, as older equipment may require more maintenance and be less efficient.

Businesses might turn to alternative financing options, such as leasing, to mitigate the impact of reduced bonus depreciation. Leasing can spread the cost of equipment over time, potentially offering more manageable cash flow implications. However, this approach may also come with higher long-term costs compared to outright purchases.

The phase-out could affect the competitive landscape, particularly for smaller construction firms that rely heavily on bonus depreciation to manage their tax liabilities. Larger firms with more robust financial resources may be better positioned to absorb the impact, potentially widening the competitive gap.

Keep in mind that your construction company can potentially combine bonus depreciation with the Section 179 deduction within the same tax year. As bonus depreciation phases out as planned, contractors may still be eligible to claim Section 179 deductions.

4. Employer Credit for Paid Leave

The tax credit for employers providing paid family and medical leave is also set to expire unless extended by Congress. This credit has been a valuable incentive for construction companies to support their employees’ well-being, which is crucial in an industry known for its demanding work conditions.

Strategic Tax Planning

Given these impending changes, it is vital for construction business owners to proactively adjust their tax strategies. Consulting with tax professionals and financial advisors can help navigate these transitions and optimize tax positions.

By staying informed and planning ahead, construction businesses can mitigate the impact of these tax law changes and continue to thrive in a shifting economic landscape.