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Table for Two – Tax Updates for Restaurant Owners

By Kristy Angerstien | Supervisor, Tax

While it seems more cooking shows are appearing on cable and streaming services, studies show Americans are still preferring to eat outside their home. A 2017 report stated the average household spends $3,008 per year on eating out. The benefits for restaurant diners are endless: convivence, fast, no mess, and healthier options are becoming more readily available. Not to mention the increase in food delivery services, such as Grubhub, Uber Eats, and Door Dash, which allow consumers to stay home in their sweatpants and enjoy restaurant-quality food delivered practically to their couch. Lower tax rates allow for more disposable income for restaurant goers and owners are starting to realize increased revenues and higher profits. Restaurant owners need to partner with an accounting firm that is up-to-date in the latest changes with reform that can be applied to the business, with a specific focus for the food industry.

Kristy Angerstien

Changes in the recent business designations will be applicable for restaurant owners, including a reduction in C Corp rate will go from 35% to 21%. Restaurants that are classified as S Corp, partnership, and sole proprietorship will benefit from the 20% qualified business deduction.

Restaurants who have recently purchased used property and certain capital expenditures will have the ability to elect 100% bonus depreciation, a positive impact on the bottom line. If the increase in customer volume is sparking ideas for a remodel, the IRS Code 179 increased from $500,000 to $1,000,000 to offset the costs.

Thankfully, the work opportunity tax credit and the FICA tip credit were not affected by tax reform. However, owners need to be aware the change in the ability not to carry back losses to prior years and only being able to deduct 80% of the NOL in future years. Restaurants whose revenue fluctuates from year to year will be impacted the most from this change.

The trend of Americans enjoying eating outside their home shows no signs of slowing down. If you own or operate a restaurant, contact me today to ensure you’re capitalizing on all the opportunities available to you.