The 2018 federal tax law is a real boon for the lodging industry, providing major tax benefits for hoteliers that elect to immediately “expense” upgrading versus depreciating it over time. But taking advantage of the law’s favorable capital expenditure expensing provisions may put your mortgage into default if you’re not careful. This is something you must discuss with your lender.
Briefly, in most loan documents there’s a clause that focuses on requiring the borrower to maintain a reasonable profit “cushion.”