Tax Deductions for the Restaurant Industry
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With tax season quietly approaching, we've decided to review some tips that can help you organize and prepare your taxes in compliance with the IRS. Working in the restaurant industry can provide you with a better salary than other types of employment but the nature of this industry usually causes employees to incur some personal expenses along the way. Learn how to itemize deductions and take advantage of the tax savings below.
Restaurant Uniforms
Whether you are part of the wait staff, a chef who spends countless hours in the kitchen, a bartender serving drinks all night or a delivery person, you may be required to wear a uniform or protective clothing at work. If you do not receive these items from your employer and pay for them out-of-pocket, then you are eligible to claim a deduction for the purchase price of the clothing as well as some of the maintenance costs like dry cleaning.
Remember, in order to claim the deduction, the clothing purchased must either provide protection from some of the safety hazards or be unsuitable for wear outside of work.
Food Delivery Expenses
If you use your personal vehicle to deliver food for the restaurant you work at, the value of your car will decrease and your monthly gas expenditures will increase. The result is the acceleration of ordinary wear and tear of your vehicle and you may even need to bring your car in for maintenance more often than normal.
Since these expenses are directly related to your employment, the IRS also allows you to claim deduction for them. If you use your vehicle for work as much as you use it for personal reasons, it’s beneficial to deduct your actual expenditures for gas, oil, repairs, lease payments and insurance premiums.
Please note, you can't deduct your total annual costs. Instead, you must allocate the expenses between work and personal use. You can do this by multiplying the annual expenses you incur by the ratio of miles you drive delivering food to the total number of miles you drive during the year. Alternatively, the IRS provides a mileage rate for each work-related mile you drive.
Other Restaurant Expenses
There are other deductions available besides uniforms and travel expenses. As long as you make cash expenditures during the tax year for the sole purpose of carrying out your employment duties and the expenses are ordinary and necessary for the restaurant industry, the IRS will allow a deduction for it. If unsure about what you can or cannot claim as a deduction, it's best to ask your accountant and do your research to make sure you are in complete compliance with the law.
Reporting Restaurant Deductions
You must report all deductions on a Schedule A, also known as a 1040 Form, along with the other miscellaneous expenses you itemize. Since the standard deduction is available to most taxpayers without having to report specifics, it is best that you itemize all your expenses so you can save more than the standard deduction.
In addition, all of your expenses are subject to a 2 percent adjusted gross income limitation, which requires that you reduce the total of all miscellaneous expenses by 2 percent of your adjusted gross income to arrive at the deductible amount.