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Hospitality · Hotel owners & franchisees
Owning a branded hotel means franchise fees, brand-required renovations, lender reporting and a payroll full of tipped staff. It also creates some of the strongest tax planning available to any business owner. Our advisors work with owners of Marriott, Hilton, IHG, Hyatt, Choice and independent hotels.
Serving United States, Virginia, Washington, DC, Maryland.
What we handle
Franchised hotels carry costs most businesses never see: initial franchise and application fees, ongoing royalty, marketing and reservation fees, property improvement plans (PIPs) the brand requires on a renewal or sale, replacement reserves for furniture and fixtures, management company fees, and financial reporting to lenders and the franchisor. Each has its own tax treatment, and getting it right affects both cash flow and the next refinancing.
Hotels also qualify for unusually strong planning. Since the 2025 tax law, 100% bonus depreciation is permanent for qualifying property acquired and placed in service after January 19, 2025, and a cost segregation study can move a large part of a hotel's cost from 39-year building life into 5-, 7- and 15-year property. Because average guest stays are seven days or less, a hotel is generally not a rental activity under the passive loss rules, so an owner who materially participates may be able to use those deductions against other income.
Speak with an advisorWhere we help
A cost segregation study combined with 100% bonus depreciation can create large first-year deductions on a new acquisition or development.
For hotels placed in service in earlier years, an accounting method change can claim missed depreciation in the current year without amending returns.
When a PIP replaces carpets, case goods or HVAC, the remaining basis of the old components can often be deducted through a partial disposition.
With short average stays, the hotel is tested under material participation instead of the rental rules, which can unlock losses for active owners.
Our approach
Franchise agreement, PIP, management agreement, fixed asset ledger and prior returns.
Depreciation, cash tax and loan covenant impact of each strategy over five years.
Cost segregation, method changes, entity and payroll setup.
Returns, lender and franchisor reporting, and audit support.
Questions
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Yes, for qualifying property. The 2025 tax law made 100% bonus depreciation permanent for property acquired and placed in service after January 19, 2025. The building shell itself is 39-year property, so a cost segregation study is what identifies the shorter-life components that qualify.
Possibly. Under Treas. Reg. section 1.469-1T(e)(3), an activity with an average customer stay of seven days or less is not a rental activity, so the loss is passive only if you do not materially participate. In Bailey v. Commissioner, T.C. Summary Op. 2011-22, the court noted that a short-stay inn is not rental real estate, which meant hours spent there did not count toward real estate professional status for the owner's other rentals. Planning has to fit how you actually run the hotel.
Initial franchise and application fees are generally intangible costs amortized over 15 years. Ongoing royalty, marketing, loyalty and reservation system fees are generally deducted in the year incurred.
Some are and some are not. Under the tangible property regulations, repairs and maintenance can be deducted while improvements are capitalized, but capitalized interior improvements may qualify as 15-year property eligible for bonus depreciation, and replaced components can often be written off.
If a third-party company runs daily operations, it is harder for an owner to show material participation, so passive loss planning needs careful documentation of the owner's own work.
No. VG CPA PC is an independent CPA firm. We advise owners of franchised and independent hotels across brands.
Latest updates
Authorized representatives can now make balance-due, amended return, extension, proposed assessment and federal tax deposit payments for business clients online. Appropriate authorization for the client and tax matter is required.
Source: IRS (IR-2026-134)
For 2027 the joint-return standard deduction rises to $33,200, the estate tax basic exclusion to $15,480,000, the annual gift exclusion to $20,000 and the Section 179 expensing limit to $2,640,000. Our advisors recommend revisiting year-end gifting and equipment purchase plans with these figures in mind.
Source: IRS (IR-2026-133)
All 6,576 nominated census tracts, including 2,594 rural tracts eligible for enhanced benefits, become Opportunity Zones on January 1, 2027 for ten years. Investors with capital gains should review the new map before committing funds.
Source: IRS (IR-2026-132)
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