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14 May 2018

Potential Benefits from the United States Tax Reform for Hotel Investors

The United States new recently-adopted tax rules offer significant changes for real estate investors, changes that many experts say could yield positive results

  • Potential Benefits from the United States Tax Reform for Hotel InvestorsPotential Benefits from the United States Tax Reform for Hotel Investors

The United States government recently passed a major tax reform bill that is bringing a significant shift in the country's tax policy.

Much of the discourse around this bill has been in regards to the massive reduction that it includes for the country's corporate tax rate, a reduction that critics say will exacerbate the already sizeable levels of wealth inequality that are causing major problems in the U.S. However, some tax law experts are saying that real estate investors stand to enjoy some of the largest financial benefits from these changes. With the vital role that real estate investment plays in the creation and construction of new hotels, this could mean a major impact for the North American hospitality industry.

An Increase of Favorable Depreciation Options

One not at all insignificant benefit for real estate owners is the expansion of when they will be able to claim a "bonus depreciation." This change, experts say, amounts to a significant deduction for investors, and that significant deduction will in effect allow them to claim 100 percent of bonus depreciation on acquisitions of existing assets. By comparison, the previous tax rules limited this incentive to just new-builds.

Dirk Wallace is a partner with Novogradac & Company, and in a recent interview he said that these new favorable rules are slated to remain in place until at least the beginning of 2022. That schedule means that real estate investors interested in benefiting from them should take advantage of the change as soon as possible.

Wallace also went on to later note that there are new options for how to claim depreciations or also for how to prioritize an interest limitation. This mean that investors should look closely at which is more favorable for them before making such an important decision.

How the Pass-Through Law Changes Can Also Help Real Estate Investors

Another major and somewhat controversial provision of the United States new tax code is that it creates a 20 percent deduction of pass-through income. This, experts say, is also potentially beneficial for real estate investors, depending on how said investors ultimately have their ownership groups structure.

Wallace has said that there are, of course, some exceptions to who can claim this type of pass-through deductions, exceptions that may include professional service firms. But they are not likely to apply to real estate. To quality, income must go to a partnership such as a limited liability corporation or to a real estate investment trust, rather than directly to an individual.

Let's take a look at a few other projects currently underway in the United States of America:

Edition Hotel Times Square

The tower, dubbed 20 Times Square, will rise 517 feet above street level and will contain 269,769 square feet of commercial space …[READ MORE]

Rosewood Miramar Beach Montecito

Spread over nearly 16 acres of prime beachfront real estate, Rosewood Miramar Beach Montecito will offer 122 guestrooms and 48 suites, many of which will be located in single-story cottages and bungalows …[READ MORE]

Andaz Hotel Palm Springs

Proposed luxury hotel and retail shops at the corner of North Palm Canyon Drive and Alejo Road. The hotel will be branded as an Andaz hotel. …[READ MORE]

More information on hotel projects in the United States of America can be found in the TOPHOTELPROJECTS database. TOPHOTELPROJECTS is the specialized service provider of cutting-edge information of the hospitality industry.


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