Savvy restaurant owners know that to maximize profit, they must make the most of every penny. It is essential for restaurant owners and other food service businesses to not only make the most of the dollars invested into their business every year, but also to take advantage of all available tax breaks.
Because tax credits, deductions and programs can change at any time, it's important to work closely with your accountant or tax advisor to ensure you're following current IRS guidelines. There are, however, some tax breaks that nearly every restaurant owner should take advantage when filing their business taxes.
For more information on small business taxes as it directly applies to restaurant operations visit the Restaurant Tax Center at IRS.gov.
Section 179 deductions
Restaurants new or used restaurant equipment can receive deductions on that year's taxes. We recommend checking with your local tax professional for exact numbers since the total amount of deductions varies from year to year.
For this reason, it is important to keep all official paperwork for ovens, coolers and other equipment purchased throughout theyear!
For more information on section 179 deductions, visit www.section179.org.
Depreciation
Many business-related purchases that depreciate hold value during tax time. The decrease in value on things like equipment can sometimes be tax deductable, however it is important to keep in mind depreciation values are variable and will be different depending on the variety of the item.
Additionally, existing businesses can apply to change accounting methods with Form 3115; a form that allows business owners to account for harder to track items that depreciate, such as smallwares, glass and silverware. Property like furniture, beverage equipment and décor falls into what the IRS classifies as Section 1245 property.
Worker tax credits
There are numerous employee-related tax credits for small-business owners. One prime example is the Small Business Health Care Tax Credit; one that many restaurants can and do take advantage of. The maximum credit will increase to 50 percent of premiums paid for small-business employers and 35 percent of premiums paid for small tax-exempt employers in 2014, according to IRS.
Food donation deduction
If you donate food to charity, the cost goes beyond ingredients - labor, storage and transportation add up, too. Research food donation deductions that include these extra costs by working closely with your CPA.
Energy-efficient restaurant equipment
In addition to saving up to $4,500 in energy costs annually, a commercial kitchen that uses ENERGY STAR® certified food service equipment may qualify for rebates and other tax deductions. Because these incentives are always changing, it's best to check with your local energy providers and ENERGYSTAR.gov to review what deductions may currently be available.