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The Economic Stimulus Act of 2008 that was enacted in February included two business-related tax incentives that may be advantageous for hoteliers: increased expensing limits and a 50 percent “bonus” depreciation.
Hotels and other businesses are able to deduct the first $250,000 of capital investment made in 2008 if they purchase less than $800,000 of capital assets in a year.
The new law also included a 50 percent “bonus” depreciation proposed by AH&LA. This allows hoteliers and other business owners to depreciate half of the cost of capital equipment purchased and placed in service during 2008. The remaining basis of the asset is then depreciated under the regular depreciation rules.
In many cases, hotels and other businesses can take advantage both of these provisions during 2008, first by applying the increased expensing deduction and then the bonus depreciation to their tax liabilities.
For example, hoteliers may want to convert to digital televisions in guest rooms. The federal government has mandated that the last day for television stations to broadcast in analog will be February 17, 2009. After that date, over-the-air TV broadcasts will be only in digital. This change will only affect those hotels which use rooftop antenna or “rabbit ears” for TV reception.
A qualifying hotelier who buys $250,000 in digital televisions can deduct the total cost of the equipment if it is purchased in 2008. If the televisions cost more than $250,000, but the hotel spends less than $800,000 on capital equipment during 2008, the hotelier can couple expanded expensing with accelerated depreciation. Under these provisions, $300,000 worth of televisions that are considered five-year property under tax depreciation rules would qualify for a $280,000 first year deduction (93 percent of the cost of the assets); and $500,000 worth of televisions could qualify for a $400,000 first year deduction (80 percent of the cost of the assets).
Please note that this advisory does not constitute tax, legal, or other advice from AH&LA. Hoteliers are strongly encouraged to consult with their tax counsels regarding their specific investment and tax situations.
For more information, contact AH&LA senior vice president for governmental affairs Shawn McBurney at (202) 289-3123 or smcburney@ahla.com.
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