Restaurant Tax Tips: How to Maximize Deductions and Minimize Risk

Running a kitchen is hard enough without the IRS breathing down your neck. Between fluctuating food costs, tipping rules, and razor-thin margins, restaurant taxes can feel like a second full-time job. The upside? When you know which expenses to track—and how to document them—you can cut your tax bill dramatically and sleep better at night.

Below are the tactics we share with our food-service clients every quarter. Use them as a checklist, and keep a CPA who specializes in restaurants on speed dial for the gray areas.

1. Capture 100 % of Your Cost of Goods Sold (COGS)

Food and beverage purchases are your biggest write-off, but only if your books reflect reality. Tight inventory counts at month-end let you calculate COGS accurately and prove the numbers if the IRS asks.

Track spoilage and comps separately—don’t let them inflate COGS.
Record vendor credits the moment they hit.
Use recipe costing software so plate costs match purchase invoices.

Need a system that speaks restaurant? Our bookkeeping & accounting services team can set up real-time COGS tracking in weeks, not months.

2. Don’t Leave the FICA Tip Credit on the Table

If you have tipped employees, Section 45B lets you claim a credit for the employer side of FICA taxes paid on tips that push wages over the minimum. It’s literally cash back for filing a single form.

Verify you file Form 8027 annually.
Reconcile reported tips against POS data to avoid under- or over-reporting.

This credit routinely shaves thousands off a busy dining room’s tax bill.

3. Bonus-Depreciate Your Kitchen Upgrades

Thanks to 100 % bonus depreciation (phasing down after 2026), most equipment—ovens, freezers, POS stations—can be expensed the year you place it in service instead of over five or seven years.

Combine that with Section 179 for front-of-house furniture, and you can offset a banner year’s profit with a much-needed remodel.

Not sure which assets qualify? Our restaurant CPA services can provide on-going support before you sign the equipment lease.

4. Separate Real Estate and Ops for Bigger Savings

Own your building? Holding the property in one LLC and leasing it to your operating company unlocks:

Cost-segregation studies to accelerate depreciation on build-outs, lighting, and even parking lots.
Legal insulation between the property and day-to-day liabilities.

Our business advisors can map the entity structure—and the paperwork—to keep both the IRS and your lenders happy.

5. Nail Your Sales-Tax and Payroll-Tax Deposits

Missing a sales-tax deadline can trigger penalties that wipe out a week’s profit; late payroll taxes are even uglier. Automate the due dates, reconcile filings to your POS, and archive every receipt in a cloud folder.

If you operate multiple locations in Columbus, Dublin, and New Albany for example, double-check rates by municipality as local audits almost always start with sales-tax mismatches.

Final Plate Presentation: Keep More, Risk Less

Margins in food service hover in the single digits. Dialing in the tax side—COGS accuracy, tip credits, smart depreciation, airtight compliance—can push you from “breaking even” to “worth all the hustle.”

Hogan CPA works with diners, breweries, and multi-unit franchises, and single location small businesses every day. We’ll tailor a tax game plan that fits your concept, your calendar, and your growth goals.

Ready to stop overpaying the taxman?
Contact us to book a free consultation before the next quarter closes.