Tax Season is Looming: Essential Restaurant Deductions

April 15th will be here before you know it, which means it’s time to start thinking about tax season. If you’re a restaurant owner, especially for a single location, you might be missing out on critical tax deductions that you’re eligible for. To round out our article series on hospitality, which included controlling cyber risks, encouraging positive reviews, and projected food trends for 2018, we’re going to give restaurant owners important some tax tips.

Labor deductions.

The cost of wages, benefits, and employment taxes paid for managers, waiters, cooks and chefs, bartenders, dishwashers, and other restaurant employees usually is the biggest expense for restaurant owners. The costs are fully deductible. Also, the cost of providing meals to employees on the premises is a tax-free fringe benefit, but the business can deduct the cost (whether this benefit is treated as part of the cost of food or a separate deduction category). If a restaurant engages entertainers on a contract basis, the cost is also deductible, and there are no employment taxes, but the business must issue a Form 1099-MISC if an entertainer is paid $600 or more during the year, according to Small Business Trends.


Buying food for your restaurant likely takes up a third of your annual budget. The good news is that these costs are deductible when it comes time to file your taxes.

Overhead and operating costs.

Rent, office supply costs and utilities are actually deductible for restaurant owners. Keep track of all of your basic operating expenses to write off this tax season.


Your New Mexico Hospitality Insurance policy costs are eligible for deduction. In addition, if you purchased a generator to prevent food spoilage in the event of a disaster or power outage, you can also write that cost off.

20% deduction.

As a bonus, there’s one more important deduction of note to restaurant owners who have pass-through entities. Starting in 2018, owners can deduct 20 percent of qualified business income as a personal deduction to reduce taxable income, which seriously reduces the effective tax rate they pay on their share of business income. However, there are various limitations that restrict restaurant owners from claiming this new write-off, and IRS guidance is needed to flesh out certain details about it.


Your company cars that you use to deliver food to customers are eligible for tax deduction. Remember, all standard operating costs, including vehicle operating costs, can be deducted from your taxes.


About Daniels Insurance, Inc.

At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.