The past two years have been a challenging time for many businesses. Restaurants are one of the many businesses that have faced struggles when it comes to making revenue and staying open. COVID-19 restrictions have limited the way restaurants are able to operate. Many face shorter business hours, restrictions with dine-ins, and less foot traffic in general due to fear of the pandemic. The beginning of the pandemic saw a major decline in business for restaurants, with the average daily revenue last spring averaging at minus 60 percent. Only in recent months have restaurant businesses started to improve and, even then, they are still operating around minus 30 to 40 percent revenue.
With so many new financial considerations and burdens for restaurants to take on, it is important for restaurants to cut expenses where they can. One of the first places to look to save on some money is through tax dollars. Finding deductions to apply to business income is a great way to minimize the amount of tax being taken off revenue. Here are some places to examine when looking for tax write-offs:
The cost of labor is usually a huge proportion of a restaurant’s expenses. Restaurant owners need to account for wages, benefits, and employment taxes for each staff member they have on their team. The costs of having these employees is fully deductible. Any money that comes from the restaurateur counts which means things like bonuses or meals provided while on the job can be considered.
One constant expense that small businesses handle is supplies and restaurants deal with some of the largest inventories of supplies to keep their business running. Food and beverages need to be ordered frequently in addition to staple kitchen appliances or delivery vans and replacing smaller supplies like linens, glassware, utensils, etc. All of these items are tax-deductible in some way. IRS Publication 535 is a great reference for business expenses.
These days advertising can occur through a variety of mediums.Whether a restaurant owner decides to use print marketing, radio, or other media, it is important to know that the cost of advertising is tax-deductible and has no dollar limit.
All business owners take on some type of insurance to protect their businesses. This expense can also be a tax write-off and can include insurance that protects anything from the physical building to spoilage of food to back-up generators. Use IRS Publication 946 for insight on capital equipment write-offs.