Running a restaurant means constantly balancing the day to day with the long term. Payroll has to go out on time, vendors need to be paid, and margins have to be watched closely, all while the focus stays on guests and service. In the middle of that, taxes often become something that only gets attention once a deadline is close.
That is understandable. Rather than expecting you to sort through tax code and IRS guidance on your own, we have pulled together a clear list of the most relevant tax deductions for restaurants in 2026.
How 2026 Tax Rules Affect Restaurants
Most restaurant tax deductions continue to follow long-established IRS principles. Ordinary and necessary business expenses remain deductible, and restaurants still benefit from a wide range of operational write-offs. What has changed is how some common expenses are treated and how much flexibility businesses have around timing.
For restaurant owners, the biggest risk in 2026 is assuming that last year’s treatment still applies without reviewing the details. A few targeted adjustments now can prevent surprises later.
Cost Of Goods Sold and Inventory Expenses
Food and beverage costs remain one of the most significant deductions for restaurants. Ingredients, alcohol, non-alcoholic beverages, and packaging used to prepare items for sale are deducted through cost of goods sold.
Accuracy matters here. Inventory should be counted consistently and valued correctly at the beginning and end of each period. When inventory is rushed or estimated loosely, taxable income can be overstated or understated without anyone realizing it until much later.
For multi-location restaurants, consistent inventory methods across locations are especially important to avoid distorted margins.
Labor and Payroll Deductions
Wages, salaries, bonuses, payroll taxes, and employer-paid benefits are all deductible business expenses. This applies to front-of-house staff, kitchen teams, management, and administrative employees.
Tips remain taxable income to employees and must be reported. Some tipped workers may qualify for up to $25,000 in federal income tax relief on their personal return, but this does not change payroll tax requirements or create a new deduction for the restaurant beyond normal wage expenses.
Rent, Utilities, and Facility Costs
Rent paid for restaurant space is fully deductible. Utilities such as gas, electricity, water, trash, and internet are also deductible operating expenses.
Routine repairs and maintenance are generally deductible in the year incurred, provided they keep the property in normal operating condition. Larger projects that improve or extend the life of the space may need to be capitalized and depreciated instead.
Understanding the difference can prevent deductions from being delayed unnecessarily.
Equipment and Capital Purchases
Restaurants invest heavily in equipment, from ovens and refrigeration to point of sale systems and furniture. How these purchases are deducted depends on the timing of when they are put in use, the cost, and the classification.
Certain equipment may qualify for immediate expensing under Section 179, while bonus depreciation now allows many qualifying assets to be fully expensed in the year they are placed into service. Choosing between these options depends on income levels, state tax treatment, and longer-term planning goals.
Build-out and tenant improvement costs also require careful review. Some improvements may qualify for accelerated depreciation, while others must be spread out over longer periods.
Business Meals And Entertainment In 2026
This is one of the most confusing areas for restaurant owners, especially given recent rule changes.
Meals with clients, vendors, landlords, or professional advisors remain 50% deductible when there is a clear business purpose and proper documentation. Meals consumed during business travel are treated the same way.
Entertainment expenses, however, are still largely non-deductible, even if business discussions take place during the event.
Employer-Provided Meals For Restaurant Staff
Starting in 2026, most meals provided by employers to employees for convenience are no longer deductible. This includes many shift meals and staff meals that were commonly deducted in prior years.
Restaurants are not automatically exempt from this rule. There are limited exceptions where meals may still be deductible, such as when the value of the meal is treated as taxable compensation or when the expense qualifies under a specific statutory exception. These situations require careful coordination between payroll and tax reporting.
For many restaurants, this is an area worth reviewing proactively rather than assuming the deduction still applies.
Vehicle And Delivery Related Expenses
Restaurants that operate delivery services, catering, or use vehicles for purchasing and management purposes may deduct vehicle-related expenses.
This can be done using the standard mileage rate or the actual expense method, but records must be consistent and complete. Mixed-use vehicles require special attention to avoid overstating deductions.
Fees paid to third-party delivery platforms are deductible operating expenses, though they should also be evaluated separately for their impact on profitability.
Planning Ahead For The 2026 Tax Year With Vast
Tax deductions for restaurants work best when paired with planning rather than cleanup. Reviewing employee meal policies, timing major equipment purchases, and maintaining consistent expense classification can all reduce risk.
Clean documentation, clear policies, and regular financial reviews make it far easier to apply deductions correctly and defend them if questions arise.
At Vast, we work with restaurant owners who want fewer surprises and more control over their financial outcomes. We help restaurants understand how tax rules apply to real-world operations, and we design systems that support accurate reporting year-round. If you want help navigating restaurant tax deductions for 2026 and beyond, reach out to Vast. We will help you structure decisions, expenses, and policies in a way that supports long-term stability and growth.