The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, delivers substantial tax relief by making permanent many provisions from the 2017 Tax Cuts and Jobs Act while adding new incentives to encourage U.S. investment and business growth. For painting contractors—often operating as pass-through entities with heavy reliance on vehicles, equipment, skilled labor, and project-based cash flow, this legislation offers immediate opportunities to improve liquidity, accelerate equipment upgrades, and reduce overall tax burdens amid rising material and labor costs.
Permanent 20% Qualified Business Income (QBI) Deduction (Section 199A)
The Qualified Business Income Deduction was signed into law as part of the Tax Cuts and Jobs Act. It allows owners of eligible entities to deduct up to 20% of their qualified business income for tax purposes (subject to limitations and phase-outs). This can lower the effective federal tax rate for these business owners in the highest tax bracket to 29.6% from 37%. While originally set to expire at the end of 2025, the OBBBA made this deduction “permanent”. Many painting businesses qualify as non-Specified Service Trade of Businesses (SSTB), thus allowing them to capitalize on this deduction. There are numerous limits and phase-outs, so it’s important to review how this applies to your tax strategy, including the current owner compensation structure, to maximize this benefit while maintaining reasonable compensation under the IRS guidance.
100% Bonus Depreciation and Expanded Section 179 Expensing
OBBBA permanently restored accelerated depreciation or expensing for qualified property (e.g., paint sprayers, scaffolding, lifts, pressure washers, trucks, trailers, and certain building improvements). These rules allow for immediate full write-offs of major purchases, freeing up cash for fleet modernization, safety gear upgrades, or technological investments.
Business Interest Deduction Relief (Section 163(j))
The limitation reverts to an EBITDA-based calculation, adding back depreciation and amortization in coming up with Adjusted Taxable Income. This benefits contractors financing vehicles, equipment, or shop expansions, increasing deductible interest and reducing carryforwards—especially helpful for capital-intensive operations with loans for growth.
SALT Cap Increase and PTET
Since the Tax Cuts and Jobs Act was signed into law, the deductibility of State and Local Taxes (SALT) has been limited to a maximum of $10,000 on an individual’s tax return. During this time, several states enacted Pass Through Entity Tax (PTET) regimes that allow owners of pass-through entities to pay (and deduct) the state's taxes related to their business income on their pass-through return. The Pass-Through Entity Tax (PTET) election remains available, allowing businesses in high-tax states to pay state taxes at the entity level and claim a federal deduction—often saving at the post-QBI marginal rate (around 29.6%). Even with the increase in the SALT limitation for many individuals, it still may be advantageous to utilize the PTET.
The One Big Beautiful Bill Act (OBBBA) represents a transformative opportunity for painting contractors in 2026 and beyond. By making permanent the 20% Qualified Business Income deduction, restoring 100% bonus depreciation and expanding Section 179 expensing, easing business interest limitations, and providing continued flexibility with PTET elections, this legislation directly addresses the unique challenges of capital-intensive, labor-driven businesses, helping to preserve cash flow, fund essential equipment upgrades, and mitigate the pressures of inflation in materials and wages. Painting contractors who act proactively—reviewing their entity structure, compensation strategies, and upcoming capital expenditures with a qualified tax advisor—can maximize these benefits to enhance competitiveness, support growth, and build long-term financial resilience in an evolving economic landscape.
This article is for informational purposes only and does not constitute tax or legal advice. Consult a qualified CPA or tax professional for guidance tailored to your specific situation.
About the Author
Caleb Lendy, CPA, MST, is a Shareholder at Bronswick Benjamin P.C., a Chicagoland-based certified public accounting and advisory firm specializing in tax solutions, assurance, and business advisory services for privately held companies. With extensive experience serving small and medium-sized businesses across key industries—including manufacturing, distribution, software and information technology and professional services, Caleb brings deep expertise in tax planning, compliance, and strategic financial guidance. He excels at helping clients navigate complex tax landscapes, optimize profitability, manage cash flow, and adapt to evolving regulations, acting as their trusted advisor. A graduate of Loyola University with a B.A. in Accounting (Summa Cum Laude), Caleb also holds a Master of Science in Taxation (M.S.T.) from DePaul University. He is a member of the American Institute of Certified Public Accountants (AICPA) and the Illinois CPA Society.
