Hotel owners and operators need to know how to deal with local taxes. There are several kinds of tax regulations, including sales tax, occupancy tax, and room occupancy tax. These can be tricky to understand. If you are unsure about the specific taxes that apply to your business, you should consult a tax expert.
The hotel industry may have to pay a variety of taxes, from property to social security. However, there are some ways to minimize these costs. You should do your research and take advantage of any opportunities to claim deductions or credits.
Hospitality businesses should be aware of Section 179 Depreciation, which can be a quick way to deduct expenses. This allowance is phased out over five years, but you can still take advantage of the full amount if you buy qualifying property before April 30, 2019.
Hotels should also be mindful of their occupancy tax liability. Some states charge an additional charge for hotel stays that are not rented for 90 days or more. In some locations, a hotel can refund the guest’s sales tax. It is important to review your hotel’s occupancy taxes with a tax professional. Avalara’s lodging tax blog can help you get your tax affairs in order.
Other types of taxes that can be difficult to handle are those that apply to short-term rental accommodations. You should check with your state’s tax department to learn what to expect. You should also check with your local assessment office to find out how they calculate the value of your property and what you will owe.
Another tax to look into is the bed tax. New York State does not administer this, but it should be noted that some hotels do not. When a customer stays at a hotel, the bed is not included in the price of the room. For this reason, the hotel has to charge a separate fee for the bed.
Property tax is one of the most important considerations for hospitality businesses. This is because of its large impact on the amount of income you have to report. To estimate how much you will owe in the next year, you should begin by reviewing previous years’ tax returns and researching similar properties.
Tax reform has changed the hospitality industry, so it’s a good idea to keep up to date on the latest news. It can also be helpful to discuss the changes with an accountant.
Depending on your situation, you might be able to claim a credit for social security and Medicare taxes. Also, you can deduct up to $1 million of your cost of qualifying property in 2018.
You should research the local assessment office’s reassessment cycle to determine what your future property tax liability will be. Once you have an idea of what you’ll owe, you can create a plan for minimizing taxes.
Hospitality businesses can claim bonus depreciation, which allows you to deduct the expense of certain new or renovated equipment, fixtures, and real estate in the year you purchase them. But, you’ll have to wait until after the first five years before you can take the full deduction.