How will taxes affect your restaurant this year? The recent Protecting Americans from Tax Hikes (PATH) Act makes permanent several expiring tax provisions, including a few which directly impact the hospitality industry.

What is being extended?

1. Section 179 small business expensing - Previous law allowed a taxpayer to immediately expense up to $25,000 of Section 179 property each year (with a dollar for dollar phase-out of the maximum deductible amount for purchases exceeding $200,000). The PATH Act permanently increases the maximum immediate expensing amount to $500,000 and the phase-out threshold to $2 million and added a provision to make inflationary increases to the limits for tax years starting after 2015. Also permanently extended is the ability to include as “Section 179 property” some qualified restaurant property and qualified leasehold improvement property – in 2015 up to $250,000 can be expensed and for 2016 and beyond, the limit will increase to the full $500,000.
2. 15 year recovery period has been restored and made permanent - If you construct a new restaurant building or repair/renovate an existing one and it is placed in service after 2014, you can deduct the costs over a 15 year period, rather than 39. Also, be sure to check out our recent blog on the new IRS safe harbor for restaurant repairs.
3. Bonus depreciation for “new” purchases- The bill extends 50% bonus depreciation on qualified property purchased and placed in service before January 1, 2017. After 2017, the bonus percentage will be phased down (40% for 2018; 30% for 2019).
4. Work Opportunity Tax Credit (WOTC) - The President approved the extension of the WOTC program through 2019, meaning that you will still have opportunity to offset the cost of recruiting, hiring and retaining certain employees. The Credit provides between $2,400 and $9,600 per employee (varies according to what category the employee falls under: unemployed, disabled veteran, individual receiving food stamps, etc.).
5. Food inventory deduction - The Act also made permanent a provision allowing restaurants to donate excess food inventory to a qualified nonprofit and receive a tax deduction for doing so. An enhanced deduction was previously only available for C corporations but has now been extended to include S corporations, partnerships and sole proprietors.

With this tax extenders package set in stone, making business decisions will be significantly easier for restaurant owners. As a restaurant owner, you will want to make sure you are fully aware of the tax breaks available to you in order to conduct the most efficient and effective establishment.

Questions? Contact any member of our Hospitality Services Group.