8 Restaurant Tax Deductions You May Not Know About

arf-january-blog-headers-blog2 New Year’s bells may have just rung, but many restaurant owners are already wringing their hands about the upcoming tax deadline. Don’t fret! There are many ways to reduce your tax burden by accounting for hidden costs of business that restaurant owners tend to overlook. For instance, did you know that interest paid on loans for restaurants is tax deductible? Or that 75% of a restaurant remodel project can now be deducted all at once? Learn about this and other restaurant owner tax deduction tips by reading on.

You Can Deduct Mileage or Expenses for Using Your Work Vehicle

If you use your personal vehicle for work, such as delivering food or picking up equipment, you can decide to either deduct the mileage credit or itemize each of your expenses. If you decide to itemize your expenses, you must carefully document each cost and be prepared to prove that the cost was directly related to business. For instance, you may have trouble justifying a transmission replacement as a business expense if you rarely use your vehicle for anything other than travel to and from work. Mileage is therefore easier to account for and document, even if it may not cover as much as itemized costs. Also, remember that the commute trip to and from work doesn’t count.

Untitled design (1)

Decide Whether to Deduct Equipment Costs Now or Through Depreciation

If you purchase restaurant equipment, whether through cash or something like a working capital loan for restaurants, you have two options for deducting that expense. You can either deduct the full cost of the item, or you can deduct the depreciation of the item over time. Many people take the full cost for less expensive equipment and depreciation for more-expensive items like ranges, so decide which scenario benefits you more over the long run.

Look at Work Opportunity Tax Credits

Hiring an individual who qualifies as a targeted group could allow you to file for a Work Opportunity Tax Credit. This tax credit is equal to 40% of the employee’s first-year wages — up to $6,000. To see if an employee is eligible, review the guidelines for filing Work Opportunity Tax Credits and then be sure to file Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) within 28 days of their hiring date.

Employee Meals Can Count as Food Costs

If employees are given a free meal or a discount on meals, be sure to include these expenses as a food cost deduction.

Employee Benefits are Deductible

In addition to wage deductions, you can deduct the cost of any benefits granted to employees.

Employee Gifts Are Deductible

Here’s a great reason to give employee gifts: they’re deductible for up to $25 per employee!   Untitled design (1)

Don’t Forget Deductions for Hidden Costs of Running a Restaurant

Commonly overlooked expenses that can be deducted include:

  • Maintenance
  • Legal Fees
  • Accounting Fees
  • Certain Types of Insurance Premiums
  • Marketing Costs
  • Interest Paid on Business Loans for Restaurants

“Safe Harbor” Laws Allow Restaurants to Deduct Remodeling Costs in Addition to Interest Paid on Loans for Restaurants

Financing a location remodel provides extra benefits following changes to the Revenue Procedure 2015-56. Up to 75% of remodeling or upgrading costs can now be deducted as “ordinary and necessary” business expenses, allowing you to deduct most of the remodel bill immediately. The remaining 25% has to capitalized and depreciated over time since it counts as expenses for improving a qualified building. So, while you handle your tax return now, plan ahead for next year by looking into restaurant remodel loans. Want to start finding the loans for restaurants you need now? You can receive a free, no-obligation quote in as little as 4 hours when you click here.