6 Tax Credits for Hotel Owners in 2026

Most hotel owners focus on occupancy rates, guest satisfaction and operational efficiency. Tax planning tends to fall lower on the priority list until filing season arrives. That approach often means leaving money on the table. Several federal tax credits and deductions available in 2026 can put significant dollars back into your pocket, but some come with deadlines that require action now.

Here are six tax opportunities every hotel owner should understand this year.

Bonus Depreciation and Cost Segregation Studies

The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. This is a big deal for hotel owners who constantly invest in furniture, fixtures, equipment and property improvements.

Under these rules, you can immediately expense the full cost of qualifying assets in the year they go into service rather than spreading deductions across decades. Hotels benefit substantially because the industry requires ongoing capital investment in everything from bedding and televisions to kitchen equipment and HVAC systems.

Pairing bonus depreciation with a cost segregation study amplifies these benefits. A cost segregation study breaks down your property into components that qualify for accelerated depreciation over 5, 7 or 15 years instead of the standard 39-year schedule. Items like carpeting, decorative lighting, landscaping and parking lot improvements can often be reclassified.

For a hotel property with $1 million in components eligible for accelerated treatment, the first-year tax savings at a 37% rate could exceed $370,000. The study itself typically costs a fraction of those savings.

Section 179D Energy Efficiency Deduction

Hotel owners considering energy upgrades face a hard deadline. The Section 179D energy efficient commercial buildings deduction will not apply to property where construction begins after June 30, 2026.

This deduction rewards improvements to interior lighting, HVAC and building envelope systems that achieve at least 25% energy savings compared to baseline standards. For 2026, the base deduction ranges from $0.59 to $1.19 per square foot depending on efficiency levels achieved. Hotels that meet prevailing wage and apprenticeship requirements can access enhanced deductions of $2.97 to $5.94 per square foot.

A 75,000-square-foot hotel achieving maximum efficiency with labor compliance could generate deductions exceeding $445,000. Common qualifying projects include LED lighting retrofits, high-efficiency heating and cooling systems, improved insulation and smart building management technology.

Given permitting and construction timelines, hotel owners planning major renovations or new construction should begin coordination with their tax advisors immediately.

FICA Tip Credit

Hotels with food and beverage operations have access to a consistent annual tax benefit through the FICA Tip Credit under IRC § 45B. This credit applies specifically to employees who provide, deliver or serve food and beverages, such as those working in the hotel’s restaurant, bar, banquet operations or room service, in situations where tipping is customary.

It’s important to understand the scope of this credit. Tips received by employees in non-food-and-beverage roles, including housekeeping, bell staff and front desk, do not qualify. Additionally, mandatory service charges, such as automatic banquet gratuities, are treated as wages rather than tips and are excluded from the credit calculation.

The credit equals the employer’s share of Social Security and Medicare taxes (7.65%) paid on qualifying tip income, computed only on tips that exceed the amount needed to bring the employee’s wages to $5.15 per hour (the federal minimum wage in effect on January 1, 2007). The credit provides a dollar-for-dollar reduction against your federal tax liability. A hotel with 25 qualifying food and beverage employees receiving $300,000 in eligible annual tip income could generate roughly $23,000 in credits each year. For larger properties or hotel groups with multiple locations, these amounts grow substantially.

Your payroll system should track tip income accurately and distinguish between discretionary tips and mandatory service charges, since proper documentation is essential for claiming the credit.

Section 199A Qualified Business Income Deduction

Pass-through hotel owners operating as sole proprietorships, partnerships, S corporations or LLCs received good news when Congress made the Section 199A deduction permanent. Previously set to expire after 2025, this provision now allows eligible taxpayers to deduct up to 20% of their qualified business income.

For a hotel owner with $400,000 in qualified business income, this translates to an $80,000 deduction. The effective reduction lowers the top marginal tax rate from 37% to approximately 29.6% for qualifying income.

Starting in 2026, the income thresholds at which the deduction phases out have been expanded. A new minimum deduction of $400 also applies for active business owners with at least $1,000 in qualifying income. The rules vary based on income levels and business type, so hotel owners should work with their tax advisors to optimize their entity structure and income strategies.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC)has historically provided significant value to hotels, which often have high turnover and ongoing hiring needs. This credit can reach $9,600 per qualified new hire from designated target groups facing employment barriers, including veterans, long-term unemployment recipients and individuals receiving certain government assistance.

However, WOTC authorization expired on December 31, 2025, and Congress has not yet renewed the program for 2026. State workforce agencies continue accepting certification requests, holding applications in pending status subject to reauthorization.

Based on historical patterns, the credit will likely be reinstated retroactively. Hotel owners should continue screening all new hires and submitting required documentation within 28 days of start dates. If Congress acts, employers with proper paperwork will be able to claim credits for qualifying hires made during any lapse period.

Historic Rehabilitation Tax Credit

Hotel owners working with historic properties can access a 20% federal tax credit for qualified rehabilitation expenditures. This applies to certified historic structures listed on the National Register of Historic Places or located in designated historic districts.

The credit works particularly well for boutique hotel conversions and renovations of existing historic hotel properties. Rehabilitation work must meet the Secretary of the Interior’s Standards for Preservation, and the credit is claimed over five years at 4% annually.

Many states offer additional credits that can be combined with the federal benefit. For properties in the right locations, combined credits can offset 25% to 40% of qualified rehabilitation costs.

Smart Planning Makes the Difference

Each of these opportunities involves specific eligibility requirements and timing considerations. The difference between capturing available tax credits and missing them often comes down to planning ahead with advisors who understand both the tax code and the hospitality industry.

If you own or operate hotel properties and want to make sure you’re taking full advantage of available credits, contact a James Moore professional to discuss your situation.

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