Tax Deductions for Restaurants: What Owners Commonly Miss
Last updated: October 17, 2026Written by Shane Atkins, founder of TaxSaver Pro
Restaurants run on thin margins and a flood of daily receipts — inventory, kitchen gear, permits, and utilities all add up. With so many moving parts, it's easy to overlook a category or lose a deductible expense in the noise. This guide covers the deductions restaurant owners most often miss.
Commonly missed deductions
01Cost of goods sold
- What qualifies
- Ingredients, food, and beverage inventory.
- What doesn't qualify
- Inventory still on hand at year end and items you take out of inventory for personal use.
- Records to keep
- Purchase invoices, beginning and ending inventory counts, and the method you use to value inventory.
- IRS source
- IRS Publication 535 — Business Expenses
02Equipment and supplies
- What qualifies
- Kitchen gear, smallwares, and replacement parts.
- What doesn't qualify
- Kitchen items taken home for personal use, food and ingredients (those belong in cost of goods sold), and larger equipment that may need to be depreciated rather than deducted all at once.
- Records to keep
- Receipts or invoices for each purchase, and for larger equipment, the date you started using it.
- Current rate
- See the current Section 179 limit on IRS.gov.
03Facility costs
- What qualifies
- Rent, utilities, and maintenance for the location.
- What doesn't qualify
- Rent on property you own, utilities and upkeep for your home, rent prepaid for future years, and improvements that add value, extend the property's life, or adapt it to a new use (these are depreciated instead of deducted all at once).
- Records to keep
- The lease agreement, proof of each rent payment, utility bills, and invoices describing any repair or maintenance work.
- IRS source
- IRS Publication 535 — Business Expenses
04Licenses and permits
- What qualifies
- Health permits, liquor licenses, and renewals.
- What doesn't qualify
- Dues to social, recreational, or athletic clubs (such as country clubs), the lobbying or political share of association dues, your personal driver's license, and fines or penalties.
- Records to keep
- Invoices or receipts, and membership statements showing any lobbying portion.
- IRS source
- IRS Publication 535 — Business Expenses
05Insurance
- What qualifies
- Liability, property, and workers' comp coverage.
- What doesn't qualify
- Personal life insurance where you or your family are the beneficiary, personal auto or homeowner's policies (those are covered through the vehicle or home office deduction), and insurance that replaces your own lost income. Self-employed health insurance is claimed separately, not as a business expense.
- Records to keep
- Policy declaration pages, premium invoices, and proof of payment.
- IRS source
- IRS Publication 535 — Business Expenses
Records checklist
A summary of every record mentioned on this page. Keep these with your tax return.
- Cost of goods soldPurchase invoices, beginning and ending inventory counts, and the method you use to value inventory.
- Equipment and suppliesReceipts or invoices for each purchase, and for larger equipment, the date you started using it.
- Facility costsThe lease agreement, proof of each rent payment, utility bills, and invoices describing any repair or maintenance work.
- Licenses and permitsInvoices or receipts, and membership statements showing any lobbying portion.
- InsurancePolicy declaration pages, premium invoices, and proof of payment.
Related guides
Go deeper on the rules behind these deductions
Educational guidance only, not tax advice. Talk to a tax professional about your situation.