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By Marcus Rivera | May 10, 2026 | How We Evaluate
Quick Answer: Restaurants can deduct a wide range of business expenses — food and beverage costs, labor, rent, equipment depreciation, marketing, insurance, and more. Keeping detailed records and working with a restaurant-savvy accountant can save thousands annually. This checklist covers the most valuable deductions available to restaurant owners in 2026.
Taxes are one of the largest expenses a restaurant owner faces — but they’re also one of the most manageable, if you know what you’re entitled to deduct. The IRS allows businesses to deduct “ordinary and necessary” expenses, and restaurants have an unusually broad set of qualifying deductions.
This checklist is designed to be practical: go through it before tax season, use it with your accountant, and make sure nothing gets left on the table. Always consult a qualified tax professional for advice specific to your situation.
Cost of Goods Sold (COGS) Deductions
Your food and beverage costs are fully deductible as a cost of doing business. This includes:
- ✅ Food ingredients and produce purchased from suppliers
- ✅ Beverages (alcoholic and non-alcoholic)
- ✅ Specialty items (cooking oils, spices, garnishes)
- ✅ Paper and packaging costs for takeout/delivery
- ✅ Catering supplies used in service
Your COGS figure comes directly from your inventory records: Beginning Inventory + Purchases – Ending Inventory. Accurate inventory management isn’t just operationally valuable — it’s also how you substantiate this deduction. See our food cost percentage guide for the full calculation methodology.
Labor and Payroll Deductions
Labor is typically a restaurant’s largest expense — and it’s largely deductible:
- ✅ Employee wages and salaries (including tipped employees)
- ✅ Employer portion of FICA (Social Security and Medicare taxes)
- ✅ Federal and state unemployment taxes (FUTA/SUTA)
- ✅ Health insurance premiums paid for employees
- ✅ Retirement plan contributions (SEP-IRA, SIMPLE IRA, 401k)
- ✅ Workers’ compensation insurance premiums
- ✅ Payroll processing fees
- ✅ Contractor payments (1099 workers) — requires issuing 1099-NEC if over $600/year
FICA Tip Credit (Form 8846): This is one of the most underutilized restaurant tax credits. If your tipped employees earn tips above the federal minimum wage, you may be able to claim a credit equal to the employer FICA taxes paid on those excess tips. This can be worth thousands of dollars annually — ask your accountant specifically about this.
Occupancy and Rent Deductions
- ✅ Monthly rent or lease payments for your restaurant space
- ✅ Common area maintenance (CAM) charges from your landlord
- ✅ Property taxes (if you own your building)
- ✅ Renter’s insurance or building insurance
- ✅ Utilities: electric, gas, water, sewer
- ✅ Trash removal and recycling services
- ✅ Pest control services
- ✅ Janitorial and cleaning services
Equipment and Depreciation Deductions
Restaurant equipment is expensive — but the tax treatment gives you options for how and when to deduct it.
| Deduction Method | What It Does | Best For |
|---|---|---|
| Section 179 | Deduct full cost in year of purchase (up to annual limit) | Equipment you want to write off immediately |
| Bonus Depreciation | Deduct a large % in year 1 (check current year rate) | Large purchases when you want front-loaded deductions |
| MACRS Depreciation | Spread deduction over 5–7 years | When you want to spread tax benefits across years |
Equipment deductions include:
- ✅ Commercial kitchen equipment (ovens, fryers, refrigerators, dishwashers)
- ✅ POS systems and terminals
- ✅ Furniture (tables, chairs, bar stools)
- ✅ Smallwares (pots, pans, knives, tools)
- ✅ Computers and tablets used for business
- ✅ Security cameras and systems
- ✅ HVAC equipment and exhaust systems
- ✅ Leasehold improvements (the rules here are complex — consult your accountant)
Marketing and Advertising Deductions
- ✅ Social media advertising (Meta, Google, TikTok ads)
- ✅ Website design, hosting, and maintenance
- ✅ Email marketing platforms and subscriptions
- ✅ Printing costs (menus, flyers, signage)
- ✅ Promotional events and tasting events held to generate business
- ✅ Photography and videography for marketing purposes
- ✅ PR and influencer marketing fees
- ✅ Loyalty program costs
- ✅ Gift cards distributed as promotions (deductible when redeemed)
- ✅ Online ordering platform commissions and fees
Insurance Deductions
Most restaurant insurance premiums are fully deductible as a business expense:
- ✅ General liability insurance
- ✅ Commercial property insurance
- ✅ Liquor liability insurance
- ✅ Business interruption insurance
- ✅ Commercial auto insurance (for delivery vehicles)
- ✅ Cyber liability insurance
- ✅ Employment practices liability insurance (EPLI)
If you’re not sure what coverage your restaurant needs, our restaurant insurance guide breaks down every policy type and typical costs.
Professional Services Deductions
- ✅ Accountant and bookkeeper fees
- ✅ Attorney fees related to business operations
- ✅ Payroll service fees (ADP, Gusto, etc.)
- ✅ Consulting fees (restaurant consultants, HR consultants)
- ✅ Business coaching and mentorship programs
- ✅ Licensing fees and permit renewals
- ✅ Bank and credit card processing fees
Meals and Entertainment Deductions
The rules around meals and entertainment deductions changed significantly with the Tax Cuts and Jobs Act. Here’s the current status:
| Expense Type | Deductibility | Notes |
|---|---|---|
| Business meals with clients (50% rule) | 50% deductible | Must be ordinary, necessary, and business-related |
| Employee meals provided on-premises | 50% deductible | Primarily for employer’s convenience |
| Holiday parties and company events | 100% deductible | Open to all employees |
| Staff meals during shift (family meal) | 50% deductible | Document as employee benefit |
| Entertainment (sporting events, concerts) | 0% deductible | No longer deductible as of 2018 |
Technology and Software Deductions
- ✅ Restaurant POS software subscriptions
- ✅ Reservation system fees (OpenTable, Resy, etc.)
- ✅ Inventory management software
- ✅ Scheduling software subscriptions (see our restaurant scheduling software guide)
- ✅ Accounting software (QuickBooks, Xero, etc.)
- ✅ Online ordering platform subscriptions
- ✅ WiFi and internet service for the restaurant
- ✅ Phone service used for business
- ✅ Cloud storage and backup services
Vehicle and Travel Deductions
- ✅ Business use of a vehicle (mileage method or actual expense method)
- ✅ Catering deliveries and supply runs (mileage)
- ✅ Travel to industry conferences and trade shows
- ✅ Meals during qualifying business travel (50% deductible)
- ✅ Hotel costs during business travel
Tip: Use a mileage tracking app (MileIQ, Everlance) for all business driving. The 2026 IRS standard mileage rate should be confirmed each January — check IRS.gov for the current rate.
Education and Training Deductions
- ✅ Food safety certifications and training (ServSafe, etc.)
- ✅ Alcohol service training (TIPS certification)
- ✅ Management training courses and workshops
- ✅ Industry conferences and membership fees
- ✅ Business books, magazines, and subscriptions
- ✅ Online courses related to restaurant operations, marketing, or finance
Start-Up Cost Deductions
If you opened your restaurant in 2025 or 2026, you can deduct up to $5,000 in startup costs in your first year, with the remainder amortized over 180 months. Qualifying costs include:
- ✅ Market research and feasibility studies
- ✅ Site scouting and lease negotiations
- ✅ Initial menu development and testing
- ✅ Pre-opening marketing and advertising
- ✅ Training costs before opening day
For a full breakdown of what it costs to open and what’s deductible, see our restaurant opening cost guide.
Record-Keeping Best Practices
Deductions are only valuable if you can substantiate them. The IRS recommends keeping records for at least 3 years, and in some cases longer. Here’s what to keep:
| Document Type | Retention Period | Storage Method |
|---|---|---|
| Sales records and POS reports | 7 years | Cloud backup + physical |
| Payroll records | 7 years | Payroll software or cloud |
| Vendor invoices and receipts | 3–7 years | Accounting software with scan |
| Equipment purchase records | Life of asset + 3 years | Physical + cloud |
| Lease agreements | Life of lease + 7 years | Physical + cloud |
| Bank and credit card statements | 7 years | Online banking + download |
Working with a Restaurant Accountant
A general accountant can file your taxes, but a restaurant-savvy accountant can save you significantly more by knowing the industry-specific deductions, credits, and structures that apply to your situation. Things like the FICA tip credit, bonus depreciation strategy, and entity structure (S-corp vs. LLC) can have massive tax implications.
If you’re using accounting software to manage your books, our guide to the best accounting software for restaurants compares the top options and what integrates best with restaurant POS systems.
Tax Deductions Quick Reference Checklist
| Category | Key Items | Deductibility |
|---|---|---|
| COGS | Food, beverage, packaging | 100% |
| Labor | Wages, taxes, benefits | 100% |
| Rent & Utilities | Rent, electric, water, gas | 100% |
| Equipment | Kitchen equipment, POS, furniture | 100% (via Section 179/depreciation) |
| Insurance | GL, property, liquor liability | 100% |
| Marketing | Ads, website, photography | 100% |
| Business Meals | Client meals, employee meals | 50% |
| Company Events | Holiday parties, team events | 100% |
| Professional Services | Accountant, attorney, consultant | 100% |
| Software & Tech | POS, scheduling, accounting apps | 100% |