How can restaurants come out ahead this tax season?

It’s been said that the only things that are certain are death and taxes. Well, with the recently passed tax law, some restaurant owners have a bit of uncertainty about how they can make the new incentives work for them.

The new tax law extends a variety of breaks to restaurant operators and owners. Unfortunately, it doesn’t appear to simplify the process of computing mandated payments.

If the restaurant business is your livelihood, you’ll want to understand what these new laws mean for you and your business.

Family Run Businesses
If you’re still making your grandfather’s famous pizza and plan to pass the business down generation to generation, new exemption thresholds have been put into place until 2025. The current inheritance tax is 40% but only when the value left to an individual exceeds $11.2M, or double the current value if you’re married.

2018 is going to be a great year to remodel.
Pay attention to Section 179. This deduction is good for new and used equipment as well as off-the-shelf software. The maximum amount that can be spent on equipment is $2.5 million. This spending cap makes Section 179 a true “small business tax incentive” (because larger businesses that spend more than $3.5 million on equipment won’t get the deduction.) Are you opening a new location or upgrading equipment? If you plan to do either, you’ll receive an immediate write-off for the investment, instead of amortizing the investment for several years. For more information on Section 179, click here.

Don’t forget about the FICA Tip Credit.
FICA Tip Credit is a tax benefit that many restaurant owners aren’t aware of or don’t use. Restaurant owners must pay taxes on the gratuities that servers and other employees receive because according to FICA, tips are income.

The IRS enacted the FICA tip credit to incentivize restaurants to report staff tip earnings. Participating restaurant owners can save hundreds of dollars per employee.

Click here for a great Paychex article on the FICA Tip Credit.

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