The One Big Beautiful Bill Act (OBBBA) introduces significant changes that impact hospitality tax planning in 2025 and beyond. For hotels, restaurants, and event venues, the legislation restores powerful incentives that can improve cash flow, accelerate deductions, and strengthen long-term growth strategies.
If you operate in the hospitality industry, understanding these new hospitality tax credits and deductions could directly impact your bottom line.
1. 100% Bonus Depreciation Returns in 2025
One of the most impactful provisions is the restoration of 100% bonus depreciation for qualifying property placed in service after January 19, 2025.
This means hotels and restaurants can immediately deduct the full cost of:
- Furniture, fixtures & equipment (FF&E)
- Kitchen equipment and appliances
- Technology systems and POS equipment
- Qualified improvement property (QIP)
- Certain interior renovations
For hospitality operators planning renovations or expansions, this creates a major opportunity to reduce taxable income in the year improvements are made.
2. Expanded Section 179 Expensing for Hospitality Businesses
The Act increases Section 179 expensing limits (up to approximately $2.5 million), allowing hospitality businesses to deduct qualifying equipment and improvements immediately.
For multi-location restaurant groups, franchise owners, and hotel operators investing in property upgrades, Section 179 provides flexibility and control over tax timing.
Strategic coordination of capital expenditures and placed-in-service dates will be critical to maximize Section 179 hospitality deductions.
3. Extension of the 20% QBI Deduction for Restaurants and Hotels
Many hospitality businesses operate as pass-through entities. The extension and modification of the 20% Qualified Business Income (QBI) deduction remains a key planning opportunity.
For:
- Restaurant owners structured as S corporations
- Boutique hotel partnerships
- Hospitality franchise operators
The QBI deduction can meaningfully reduce taxable income — especially when wage levels and qualified property are properly structured.
4. Increased Interest Deduction Opportunities for Hotel Owners
The reinstatement of EBITDA-based calculations under Section 163(j) may allow greater interest deductions for debt-financed properties.
Given that hotel acquisitions and renovations are often highly leveraged, this change may improve tax efficiency for real estate-heavy hospitality portfolios.
5. Workforce-Related Tax Benefits for Hospitality Employers
The Act introduces temporary above-the-line deductions for tipped income and overtime pay through 2028.
While these provisions primarily benefit employees, they may support recruitment and retention in the restaurant and hospitality sectors. Additionally, expanded tax credits for paid family leave and employer-provided childcare may create further hospitality tax credit opportunities for qualifying employers.
Why Hospitality Tax Planning Matters Now
The One Big Beautiful Bill Act creates significant tax planning opportunities — but timing and execution are everything.
Hospitality operators should consider:
- Conducting cost segregation studies
- Evaluating renovation timelines
- Reviewing entity structures for QBI optimization
- Modeling financing structures under revised interest rules
- Assessing eligibility for available hospitality tax credits
If you’re planning renovations, expansions, or ownership transitions in 2026, now is the time to align your tax strategy with the new law.
Ready to Rack Up Your Tax Credits?
At Tax Credit Group, we specialize in identifying and maximizing tax credits for hotels, restaurants, and hospitality businesses. From cost segregation to credit analysis, our goal is simple: improve cash flow, reduce tax liability, and support long-term growth.
To schedule a consultation, visit our website or call (563) 552-7180.
