How Does the ERTC Benefit Boutique Hotels and B&Bs?

January 22, 2024
Dayes Law Firm

Do you own a hotel, chalet, B&B, or another business in the hospitality industry? The Coronavirus Aid, Relief, and Economic Security (CARES) Act might allow you to claim the Employee Retention Tax Credit (ERTC). The ERTC for hotels and B&Bs may apply to you if your business dealt with closures, various restrictions, or major losses due to government orders during the pandemic. 

Are You Eligible for the ERTC?

Claiming the ERTC might be an option for you if your boutique hotel or B&B kept workers on payroll during the pandemic and at least one of the two is true for your business:

  • COVID-related government orders caused full or partial suspension of your operations
  • Your gross receipts fell by 50% or more in 2020, and by 20% or more in 2021, compared to the same quarters in 2019

Small hotels, B&Bs, and boutique resorts often qualify for this tax credit because they were some of the first businesses to suffer during the pandemic. Government mandates may have forced you to shut down or limited your guest capacity, and you may have lost clients because people were afraid to visit public places.

Additionally, as a small business, your employee number probably also complies with ERTC rules. The credit is available to businesses that did employ up to 100 full-time workers in 2020 and up to 500 full-time workers in 2021.

Check the Fine Print

Apart from ensuring you’re eligible for the ERTC, you must check what counts as qualified wages for this tax credit. For example, you probably won’t be able to claim the credit for your own and other majority owners’ wages. Also, if you had a PPP loan forgiven and paid wages using these funds, you should dismiss these wages from credit calculations. 

Consulting a competent tax professional will help you understand, first, whether you can claim the ERTC for your hotel or B&B, and second, how to calculate this tax credit using your payroll records. 

How to Use ERTC Funds

Collecting a substantial tax credit is the perfect opportunity to reinvest in your business. However, you need a sound financial plan, or any cash might disappear very quickly. The following suggestions are just a few possible options for using ERTC money.

Expand Your Services

Have you dreamed of adding a cafe, bar, or restaurant to your boutique hotel as an extra attraction? A big money boost can allow you to do that without acquiring debt or cutting down your cash flow. Alternatively, you could buy a related business in the area and merge it with your hotel’s brand. 

Renovate Your Hotel or B&B

You could repaint your hotel, upgrade the doors and windows, buy new furniture, build a swimming pool, or plan other renovations that would make your location more inviting to guests. Your renovation program could also promote energy efficiency by installing a solar system or investing in better insulation. 

Pay Off Debt

This may be a less glamorous option, but if your business carries debt, you could use your tax refund to repay some or all of it. If any money remains after you pay off your debts, you could set up an emergency fund for a rainy day.

Questions About the ERTC for Hotels and B&Bs? Call Dayes Law Firm

It can be tricky to determine whether the ERTC for hotels is an option for your business. If you have questions about this credit, contact Dayes Law Firm. A skilled tax lawyer will review your records, let you know whether you can claim the ERC, and help you calculate qualifying wages for your amended tax return. For a free consultation, call 800-503-2000 or fill out our online form.