Hotels and Resorts
Hotels are generally 39-year nonresidential real property because transient lodging is excluded from the dwelling-unit definition. Guest-room furniture is 5-year property in the IRS casino and hotel matrix. That matrix is examiner guidance written for hotel/casino complexes, not a statute for every resort.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- Section 168(e)(2)(A)(ii) provides that a unit in a hotel, motel, or similar establishment where more than half the units are used on a transient basis is not a dwelling unit.
- Hotel buildings are therefore generally 39-year nonresidential real property, straight line, mid-month.
- The casino and gaming matrix in Publication 5653 includes hotel-area rows and is the closest official examiner table.
- Guest-room furniture is listed there as §1245 class 57.0 property; guest-room general-use outlets, including bath GFI, are building.
- Interior pools attached to the building stay with the building; exterior pools are 15-year land improvements in that matrix.
- Bonus depreciation as of 2026 can apply to qualified FF&E and site work acquired after January 19, 2025, not to the 39-year hotel unless QIP later applies.
A hotel building is nonresidential real property. Transient occupancy is the statutory reason: units in a hotel, motel, or other establishment more than one-half of whose units are used on a transient basis are not dwelling units, so the 80% residential test is not met. The recovery period is 39 years under §168(c), with the mid-month convention. Land is excluded from depreciable basis.
There is no stand-alone non-casino hotel matrix in Publication 5653. Hotel rows appear inside Chapter 7.E, the casino and gaming matrix (originating as a 2006 field directive). The ATG says each matrix reflects general fact patterns for one industry and may not apply to other industries. Using those hotel-area rows for a limited-service hotel without a casino is an analogy, not a holding.
In that matrix, guest-room furniture — beds, dressers, armoires, night tables — is §1245, class 57.0, 5-year property. Guest-room and guest-bath general-use outlets, including bath GFI, are 39-year building. Removable floor covering in casino and theater areas is class 79.0, 7-year; outside those areas it is class 57.0, 5-year. Computerized door locks are building in that matrix. Those rows do not mean every lock or every carpet in every hotel is that class.
Restaurants inside a hotel are cross-referenced to the restaurant matrix for kitchen equipment, dedicated hook-ups, and sole-justification kitchen HVAC. Exterior pools are class 00.3, 15-year; interior pools in or attached to the building are 39-year. Spa hook-ups in a fitness center are listed as §1245 in that matrix. Pylon sign structures are 15-year; sign faces are 5-year. Emergency generators for building life-safety are building; generators for casino operations are 7-year recreation property and should not be copied onto a hotel that has no casino floor.
Treas. Reg. §1.48-1(e)(1) defines a building as a structure enclosing space, usually roofed, used for shelter, housing, working, office, parking, display, or sales. A hotel fits that definition. Structural components include central HVAC, general wiring and lighting, plumbing fixtures, elevators, and sprinklers. Decorative lighting can be personal property when it is not needed for building operation — the ATG’s “if the decorative lighting were turned off, other sources would provide sufficient light” test — but primary guest-room lighting stays with the building.
This page is educational information, not tax advice. Proposed Super Intelligence hotel templates are explanatory only.
Why hotels are not 27.5-year property
The dwelling-unit definition in §168(e)(2)(A)(ii) is the reason, not a trade-industry custom. Publication 527 repeats the hotel and motel exclusion. A resort with residences sold as dwellings is a mixed-use problem: apply the 80% test to each building or structure. Do not assume a “condo-hotel” tower is residential because some units have kitchens.
Extended-stay products are discussed on the motel page. If occupancy is still transient under the statute, the building remains nonresidential. If facts change, a CPA applies the test; this hotel page does not reclassify those products.
Personal property, land improvements, and structure
FF&E is the dense personal-property category. Class 57.0 is the activity class the ATG uses for hotel guest-room furniture. Asset class 00.11 (office furniture, 7-year) can apply to back-of-house offices when that asset category describes the item, following Rev. Rul. 2003-81’s asset-category-first rule. Do not put every desk in 5-year property by habit.
Surface lots, site lighting poles, and perimeter fences are usually 00.3, 15-year. Parking structures are buildings (39-year) in the retail matrix and ATG Chapter 8.B. Landscaping follows the land-versus-00.3 replacement test. Never treat the porte-cochère of a hotel as 15-year land improvement merely because cars drive under it; Chapter 7.H notes a porte-cochère at hotels and motels that are not residential rental property as a building item in that comparison.
Documentation
FF&E invoices, guest-room typical drawings, kitchen process drawings, pool location (interior versus exterior), and generator one-line diagrams showing life-safety versus operations loads are the records that make matrix rows usable. Acquisition studies need a land-first allocation and a field inspection. A written purchase-price allocation can bind the parties under Peco Foods when §1060 applies; that is an acquisition risk, not a hotel-matrix row.
The ATG residual method is especially tempting on hotels because FF&E is visible. The guide says that method can be less accurate and can skew toward §1245. Reconcile to actual cost with one estimating technique.
Bonus depreciation and QIP as of 2026
Qualified property acquired after January 19, 2025 is eligible for 100% bonus depreciation under Notice 2026-11. The 39-year hotel is not qualified property. Guest-room furniture, qualifying decorative items, restaurant equipment, and 15-year site work can be. Used FF&E can qualify if the taxpayer did not previously use it and related-party limits are met. Binding contracts on or before January 19, 2025 stay on the phase-down.
Interior improvements the taxpayer makes after the hotel was first placed in service may be qualified improvement property — 15-year, bonus-eligible — if they meet §168(e)(6): interior portion of nonresidential real property, not an enlargement, not an elevator or escalator, and not internal structural framework. Guest-room refresh programs often mix QIP-eligible finishes with replacement FF&E. Split the costs. Educational information, not tax advice.
Limits of the casino matrix
Gaming-area electrical hook-ups and casino-floor floor covering use class 79.0, 7-year, in Chapter 7.E. Those rows belong to casino and theater space. Copying them onto a ballroom or a limited-service corridor is an industry-matrix error the ATG itself warns against.
Do not invent a typical hotel personal-property percentage. AmeriSouth is an apartment case and does not classify hotel millwork. Decorative millwork can be personal property in the restaurant matrix and structural in an apartment case; a hotel corridor needs its own facts.
Sources
- 1
- 2IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
- 3IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.
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