1. OPERATING EXPENSES
There are three different types of operating costs in restaurants:
- Fixed Costs - these never or rarely change month over month. Things like rent, utilities, and cable bills.
- Variable costs - Things that you have to buy where the price can fluctuate. For restaurants, the best example of this is the cost of food. Sometimes a head of lettuce will be quite cheap, and other times it will be much more expensive.
- Semi-variable costs - When you can rely on the cost of something most of the time, that's called a semi-variable cost. Labor costs can fluctuate depending on the season, especially in the food service industry.
OK, so you have to pay for these things, but deductibles can save you money on most of these.
The key to finding deductibles is good bookkeeping. The more precisely you track your expenses, the more likely you are to find places where you can deduct them from your taxes. A solid bookkeeping service like QuickBooks can make keeping your books in order a breeze.
2. ADVERTISING EXPENSES
Advertising and marketing are a must for restaurants for a couple of reasons.
- It lets potential customers know what yummy foods you offer
- It sets you apart from your competition
- It's extremely deductible on your taxes
When you can increase the number of customers coming in your door and get a tax break doing it, why wouldn't you?
3. DRIVING EXPENSES
In the last few years, food delivery has taken off at an astronomical rate. The best part about giving your customers hot food at their house is two-fold - more revenue for you, and the cost of these trips can be expensed!
That's right! All you have to do is use the IRS's standard mileage deduction to understand how much and what you can deduct. Keep in mind you cannot deduct personal expenses like trips to and from work.
4. EMPLOYEE PAY AND BENEFITS
Employees are often one of the biggest expenses for restaurants, but that's OK because labor is all expensable.
Some of the things that are generally OK to expense regarding labor include:
- Employee pay, which includes bonuses, commissions, vacation, and sick pay
- All the taxes you pay to the IRS when it comes to employment
- Most benefits like health plans, life insurance, and even some retirement plans
In conclusion, managing expenses effectively can have a significant impact on the financial health of your restaurant. By tracking and deducting operating costs through proper bookkeeping, you can optimize your tax savings. Investing in advertising and marketing not only attracts customers but also provides deductible expenses. Additionally, leveraging food delivery services can generate extra revenue while benefiting from deductible driving expenses. Lastly, employee pay and benefits, including taxes and various plans, are all eligible for deduction. By understanding and utilizing these deductible expenses, you can maximize your financial efficiency and ultimately contribute to the success of your restaurant.
