Several tax law changes in recent years have created meaningful opportunities for restaurant owners — but only if you know about them and take deliberate steps to capture the benefit.
The most significant is the 15-year depreciation period for qualified improvement property (QIP) — the category that covers most restaurant build-outs, renovations, and interior improvements. Combined with bonus depreciation, this allows you to deduct the full cost of qualified improvements in the year they are placed in service, rather than depreciating them over 39 years.
The Work Opportunity Tax Credit (WOTC) is another underutilized provision for restaurants. If you hire employees from certain targeted groups — veterans, individuals on public assistance, ex-felons, and others — you may qualify for a federal tax credit of up to $9,600 per qualifying employee.
Section 179 expensing allows you to immediately deduct the cost of qualifying equipment and property rather than depreciating it over time. For restaurant equipment purchases, this is a significant planning opportunity.
The key to capturing these benefits is proactive planning. Most of them require action before year-end — or documentation that needs to be in place before you file. Waiting until tax season is often too late.
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