Tax insight

Tax Act expands availability of completed contract method to residential construction

Insight
5 minute read
September 18, 2025

What happened?

Under the One Big Beautiful Bill Act (the Act), more companies now are eligible to use the completed contract method (CCM) under Section 460 to account for income from residential construction entered into in tax years beginning on or after July 4, 2025.

Why is it relevant?

This expansion of the CCM allows more builders to defer the recognition of income from the construction of condos and large multifamily projects until the project is substantially complete, potentially improving cash flow and reducing administrative complexity. Previously, the exception for the CCM was limited to home construction contracts involving four or fewer units, meaning larger residential construction projects were subject to the percentage of completion method (PCM) or the percentage-of-completion capitalized cost method (PCCM).

Action to consider

The Act’s amendments to the long-term contract rules provide significant tax planning and cash flow opportunities for developers, builders, and contractors working on larger-scale residential developments. Taxpayers with qualifying projects should begin evaluating how these changes affect current and future contracts, including how and when to implement new accounting methods. In addition, companies should monitor further regulatory or administrative guidance that may clarify the application of these changes, particularly with respect to the definition of “residential construction contract” and any transition rules, including changes in accounting methods.