1. Cost of Goods Sold (COGS)
This includes all your ingredients and supplies used in food and drink preparation. Accurate inventory tracking is crucial to maximize this deduction.
2. Employee Wages and Tips
Payroll expenses, including salaries, hourly wages, and even tip-related payroll taxes paid by the employer, are deductible. Don’t forget about bonuses and seasonal staff.
3. Depreciation on Equipment
Did you purchase new ovens, POS systems, or refrigeration units? These assets can be depreciated over time—or possibly expensed in the year of purchase under Section 179 or bonus depreciation rules.
4. Meals & Entertainment (With Limits)
Meals provided to employees during work hours (like staff meals) are generally 50% deductible. Client meals tied to business purposes may also qualify—though recent changes to tax law have narrowed eligibility.
5. Marketing & Advertising
This includes everything from your website and social media ads to menu printing and signage. These expenses are fully deductible and should be tracked consistently.
6. Repairs and Maintenance
Routine upkeep of kitchen equipment, HVAC systems, or dining spaces can be deducted—just make sure the expense doesn’t qualify as a capital improvement, which would require depreciation.
7. Licensing and Permit Fees
Health permits, liquor licenses, and other required government fees can be expensed in the year they’re incurred.
Conclusion: Restaurant accounting can be complex, especially with frequent changes in tax regulations. Work with a firm experienced in hospitality tax planning to ensure you’re not leaving money on the table.
