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Wipfli’s construction business consulting services are built on our 75-year legacy as a trusted advisor to the construction industry. We understand the barriers leaders face when building and sustaining a growing organization. That’s why our engagements are delivered by advisors dedicated to construction, who can provide solutions tailored to your industry and business.
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Year-end tax planning for construction companies
For construction companies, year-end tax planning should never be viewed as an exercise in simply reducing taxable income. The most successful contractors approach tax planning as a strategic component of overall business performance, balancing cash flow, capital allocation, bonding capacity, growth objectives and shareholder value. While there have been relatively few legislative developments significantly impacting the construction industry this year, that should not be mistaken for a lack of planning opportunities. In fact, in the absence of major tax law changes, the fundamentals become even more important. As 2026 draws to a close, construction executives should focus their attention on three critical areas: capital expenditure and depreciation strategy, long-term contract accounting considerations and aligning deductions with projected marginal tax rates. Capital investment decisions require more than a tax lens Many contractors are evaluating fleet replacement cycles, equipment acquisitions, technology investments and facility improvements as they prepare for the upcoming construction season. The tax benefits associated with accelerated depreciation remain an important planning tool. However, leading construction companies understand that the objective is not to maximize deductions. The objective is to maximize after-tax returns. Too often, businesses allow tax considerations to drive capital spending decisions. Equipment should be acquired because it improves productivity, expands capacity, reduces operating costs or supports strategic growth initiatives. The tax benefit should enhance the investment decision, not justify it. At year-end, management teams should evaluate: Planned equipment purchases and placement-in-service timing Utilization rates across existing fleets Opportunities to accelerate or defer depreciation deductions State tax conformity considerations Impacts on financial reporting, debt covenants and bonding metrics In a higher-interest-rate environment and with continued pressure on equipment costs, preserving cash remains a critical consideration. The most effective depreciation strategy is the one that supports both the company’s tax position and its capital allocation objectives. The question should not be, “How much depreciation can we generate?” Rather, it should be, “How should depreciation be deployed to achieve the greatest economic benefit?” Long-term contract accounting deserves renewed attention For many construction companies, taxable income is influenced more by project performance and accounting methods than by any individual deduction. Year-end provides an important opportunity to critically assess contract estimates and revenue recognition assumptions. Small changes in estimated project costs can have significant impacts on taxable income, particularly for contractors reporting income under percentage-of-completion methodologies. Construction executives should challenge project teams to revisit: Cost-to-complete estimates Job profitability forecasts Change order assumptions Claims and dispute recoverability assessments Schedule delays and productivity impacts Work-in-process reporting accuracy Periods of economic uncertainty often expose weaknesses in estimating processes. Labor challenges, supply chain disruptions, subcontractor performance issues and project delays can create meaningful variances between estimated and actual project outcomes. Year-end tax planning should therefore begin with an objective assessment of project economics. Accurate contract reporting is not simply a compliance exercise; it is a critical business discipline that affects tax liability, banking relationships, bonding capacity and operational decision-making. Contractors anticipating substantial growth should also examine whether future revenue levels could affect the accounting methods available to them. The best planning opportunities often emerge before a company crosses key thresholds, not afterward. Marginal tax rate planning may be the most valuable conversation of the year One of the most overlooked aspects of tax planning is determining whether deductions are being utilized in the year in which they provide the greatest benefit. For privately held construction companies, tax planning rarely occurs in isolation. The tax position of the business and its shareholders are often directly connected. As a result, management should evaluate whether it is advantageous to accelerate deductions into the current year or preserve them for future periods where higher tax rates or increased profitability may produce greater economic value. Areas commonly considered include: Depreciation elections Owner compensation strategies Retirement plan contributions Timing of discretionary expenditures Cost segregation opportunities Repairs and maintenance analyses State tax planning initiatives The goal is not to achieve the lowest possible tax liability in 2026. The goal is to optimize tax liabilities over multiple years. Sophisticated tax planning recognizes that a deduction is only as valuable as the rate against which it is applied. In some circumstances, accelerating deductions creates immediate cash flow benefits. In others, preserving those deductions may generate a superior long-term outcome. Tax planning should support business strategy The strongest construction companies do not separate tax strategy from business strategy. Capital investments, project selection, growth plans, succession objectives, compensation programs and financing decisions all carry tax implications. When these decisions are evaluated independently, opportunities are often missed. When they are evaluated together, tax planning becomes a tool for enhancing enterprise value. As year-end approaches, construction executives should focus less on identifying last-minute deductions and more on understanding how current decisions will impact future cash flow, profitability and shareholder returns. The contractors that create the greatest long-term value are rarely those that pay the least tax in a given year. More often, they are the organizations that consistently align operational decisions, financial reporting and tax strategy to support sustainable growth. In today’s environment, that alignment may be the most valuable year-end planning opportunity of all. Every construction company faces a unique combination of growth objectives, project risk, capital investment needs and shareholder considerations. The most effective year-end tax strategies are tailored to those specific circumstances and developed before critical decisions are finalized.
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Construction technology ROI: Maximizing your investments
Construction companies are facing a challenge: How do they justify and measure their technology spends return on investment (ROI)? For an industry that has faced numerous challenges, such as labor shortages and supply chain disruptions, technology helps firms adapt to these challenges by improving efficiency and enabling new business models. The benefits of digital transformation are clear, but firms often struggle to quantify the impact of their tech investments. This hesitation can put them at a competitive disadvantage. With the right approach, though, even modest technology budgets can make an impact. Forward-thinking construction firms recognize that strategic technology investments can drive efficiency, improve project outcomes and ultimately increase profits. The key is to understand how to measure and maximize the ROI of these investments. What is construction technology ROI Construction technology ROI measures the financial and operational return a firm gains from its technology investments relative to the costs of acquiring, implementing and maintaining them. In construction, a “return” is not limited to direct revenue. It also encompasses reduced expenses, time savings, risk mitigation and improved project outcomes. Unlike a simple profit calculation, technology ROI accounts for both tangible gains, such as reduced labor hours or fewer change orders, and intangible gains, such as improved client satisfaction or stronger data visibility. Understanding ROI gives decision-makers a structured way to evaluate whether a technology investment is delivering value and where future spending should be directed. How to measure the ROI of construction technology To measure the ROI of their technology investments, construction companies need to identify the most important KPIs before adopting new tech. Measuring construction ROI helps justify spending and guides future decisions. Construction companies should focus on these key areas: Cost savings The most straightforward way to measure ROI is by calculating the cost savings achieved through technology investments. This can include reductions in labor costs, material waste and project delays. Productivity gains Mobile apps and cloud-based tools allow for real-time data collection and sharing , reducing delays and improving decision-making. To measure productivity gains, compare the time taken to complete tasks or the number of projects completed in a given time frame before and after implementing new technology. Revenue growth Digital tools that improve bid accuracy or allow a firm to take on more complex projects can win more contracts and lead to higher-value work. Track your bid win rate and the average value of contracts before and after implementing new technology to gauge this impact. Quality improvements Tools like Building Information Modeling (BIM) systems can catch design flaws early, preventing expensive rework down the line. Monitor metrics like the number of change orders, rework instances and client feedback to assess quality improvements. Safety enhancements Wearable devices, sensors and AI-powered analysis can significantly improve job site safety. The ROI here comes in the form of reduced accidents, lower insurance premiums and less downtime due to safety incidents. Track incident rates, insurance costs and lost time due to accidents to quantify these improvements. Customer satisfaction Satisfied customers are more likely to return for future projects and refer your company to others. Surveys and feedback forms can help quantify customer satisfaction levels. Data-driven decision-making Access to real-time data and analytics can lead to better project management and resource allocation. By tracking metrics in these categories, construction firms can gain a comprehensive view of their ROI. For instance, cost savings might be reflected in reduced labor hours or decreased material waste. Productivity gains could be measured by comparing project completion times before and after implementing new tools. Revenue growth may be evident in an increased bid win rate or higher-value contracts secured. The construction industry technology spending standard can vary widely depending on company size, project scope and specific technology needs. However, construction companies typically allocate a percentage — around 1% to 5% — of their annual revenue to technology investments. Spending usually covers project management software, customer relationship management (CRM) systems, enterprise resource planning (ERP) systems and other digital tools. How to calculate construction technology ROI The standard formula for calculating ROI on a technology investment is: ROI (%) = [(net benefit − total investment cost) ÷ total investment cost] × 100 In this equation: Net benefit = the total value generated by the technology (cost savings + productivity gains + revenue increases + risk reduction) Total investment cost = all costs associated with the technology, including software licensing, implementation, training and ongoing maintenance A positive ROI indicates the technology is generating more value than it costs. A negative ROI signals that the investment has not yet paid off, though some technology investments, particularly large platform implementations, may take more than a year to reach a positive return. Here’s an example A contractor invests $50,000 in a cloud-based project management platform. After 12 months of use, the firm documents the following measurable outcomes: Benefit Value Reduced rework costs (fewer change orders) $30,000 Labor hours recovered through automated reporting $15,000 New contract value from improved bid accuracy $20,000 Total net benefit $65,000 The formula gives us the following result: ROI = [($65,000 − $50,000) ÷ $50,000] × 100 = 30% This means for every dollar invested, the firm returned $1.30 in measurable value within a single year. While not every benefit will be this straightforward to quantify, even partial measurement gives leadership a defensible basis for technology decision-making. How to maximize the ROI of construction technology Construction companies with limited budgets can still make impactful technology investments. Consider the following strategies: Prioritize essential tools: Focus on technology that addresses critical needs first. Project management software, CRM systems and accounting software provide the most immediate benefits. Embrace cloud solutions: Cloud-based software typically offers lower upfront costs than on-premises solutions and can be scaled as the company grows. Invest in training: Ensure your team can effectively use new tools. Proper training maximizes ROI by helping ensure tools are used effectively. Outsource IT services: This can be more cost-effective than hiring full-time IT staff and can provide access to expertise that might otherwise be out of reach. Seek vendor discounts: Some technology vendors offer discounts for industry-specific solutions. Plan for incremental upgrades: Rather than overhauling all systems at once, plan for incremental upgrades. This approach spreads costs over time and gradually improves your technology infrastructure. Monitor and evaluate: Regularly monitor the performance of your technology investments and evaluate their impact on your operations. This ongoing evaluation helps inform future decisions and ensures you are getting the best return on your tech spending. Even modest technology investments can yield significant benefits in efficiency, productivity and profitability. By carefully selecting and implementing the right tools, small firms can position themselves for growth and success. State of technology in construction report How are other construction firms utilizing technology? To get answers, Wipfli surveyed 308 construction and real estate executives to understand their technology progress, pain points and strategic priorities. Download our 2026 state of technology in the construction industry report to gain insights from other construction leaders. Read more The AI data center construction trends shaping the next decade Data lakehouses: The key to scalable AI in construction AI Agents in construction: The new path to operational efficiency
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