2016 is bringing a series of new tax changes. Restaurant owners should stay on top of these changes to make the best possible decisions for their businesses.
A series of tax changes are coming that will give restaurateurs more certainty in their business decisions. Legislation signed into law at the end of 2015 makes tax credits and deductions permanent or extends them for longer periods of time that will provide billions of dollars in tax relief for the restaurant industry. The National Restaurant Association points out five crucial changes to the restaurant tax system and how these changes may translate into your restaurant’s day-to-day operations.
- Fifteen-year depreciation will allow you to deduct spending on building a new restaurant, improving your existing building, or making improvements to a space you lease over a 15-year period rather than a 39.5-year period.
- Section 179 expensing: If you invest in a tangible property for your business, such as computers or furniture, you can deduct $500,000 of the cost of financed purchases up to $2 million under the IRS’s Section 179 provisions, up from $25,000 against $200,000 in purchases today.
- Bonus depreciation: If you put qualified property into place from 2015 to 2019, you’ll be able to claim a significant “bonus depreciation” amount: 50% from 2015 to 2017, scaled down to 30% by 2019.
- If your business is an S corp or an LLC, and you make charitable donations of food inventory, you now get the same enhanced tax deduction corporations receive.
- If you use the Work Opportunity Tax Credit to offset the cost of recruiting, hiring, and retaining some of your employees, you now have the certainty of knowing that the WOTC program is around at least through 2019.
If you have been thinking of making upgrades to your restaurant’s building, technology, or are interested in building an entirely new facility, these tax breaks for restaurant owners in 2016 may provide the perfect climate to add a capital advance to your financing mix. You can now have the opportunity to go forward with these improvements to help boost your restaurant’s success.
Navigating tax season is challenging for every company, and restaurants and other small businesses are exceptionally vulnerable to dissecting tax issues and making the best decisions for your financial health. The changes highlighted here can’t substitute for professional advice, so reviewing your restaurant’s tax return with an accountant or tax advisor should be at the top of your list this tax season. Quality accounts can help isolate certain problems with your restaurant’s financial health and can help you map out a specific plan for the future to help correct these issues and boost financial growth.