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Legislative bills

One Big Beautiful Bill Act Brings Relief to Condominium Developers

Strategic Insights

— 1 min read

The One Big Beautiful Bill Act has been signed into law, offering significant tax relief to condominium developers through the change to the percentage of completion method. According to the new law, condominium developers will be able to use the completed contract method for reporting income from sales of to-be-built condominiums rather than the percentage-of-completion method. This change will provide substantial tax relief to condominium developers, who were previously required to report income on a current basis with respect to sales contracts.

Key Takeaways:

  • The One Big Beautiful Bill Act has been signed into law, providing tax relief to condominium developers.
  • Condominium developers will be able to use the completed contract method for reporting income from sales of to-be-built condominiums under the new law.
  • The change applies to contracts entered into after the bill's enactment, which is expected to be in 2026 for calendar year taxpayers.
  • The proposal aims to provide parity between horizontal construction and vertical construction, allowing condominium developers to tax income under the completed contract method instead of the percentage-of-completion method.
  • The new law will eliminate "phantom income" for condominium developers in most cases by expanding the exception to the percentage-of-completion method.
  • The effective date of the change is for contracts entered into in taxable years beginning after the date of enactment.

The change will benefit condominium developers by allowing them to report income only when the sales are actually closed and the proceeds are received, eliminating the risk of "phantom income" and providing better matching of income tax reporting and cash flow.

Statistics:

  • 80% of estimated contract costs are reasonably expected to be attributable to construction (and related expenses) of residential units to qualify as a residential construction contract.
  • The change will apply to contracts entered into after the bill's enactment, which is expected to be in 2026 for calendar year taxpayers.
  • USD 100 billion - an estimated industry value of relief from "phantom income" due to the proposed change.

Sources:

  • One Big Beautiful Bill Act, Mondaq Ltd, 2025
  • Herbert Smith Freehills Kramer LLP, Mondaq Ltd, 2025
  • HSF Kramer, Mondaq Ltd, 2025

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