Six Effective Tax-Saving Strategies for Restaurant Owners

May 26, 2025

Restaurants, an industry with substantial Korean American participation, face intense competition and rising labor and other costs, making profitability difficult to maintain. Many owners are therefore looking for lawful ways to reduce taxes. This column introduces six practical tax-saving strategies for restaurant owners.

1. Tip Credit

Employers must pay Social Security and Medicare taxes (FICA) on employees’ tip income. Form 8846, however, allows part of the employer-paid FICA taxes to be recovered through a tax credit. This can provide substantial savings for businesses with a high proportion of tips and deserves careful attention. Even if the Trump administration makes tip income tax-exempt, the FICA treatment is likely to remain unchanged.

2. Employ Family Members

Lawfully employing family members, particularly children under age 18, may qualify for an exemption from FICA taxes if specific conditions are met. This approach is available only to sole proprietorships and partnerships consisting solely of the parents. In addition to tax savings, paying children income can transfer assets for future needs such as education. Family-member wages are also business expenses, reducing taxable business income. Combining this strategy with a Roth IRA for the child may improve the benefits.

3. R&D Tax Credit

Costs of business innovation, such as developing recipes or new menu items, improving existing recipes, and improving production processes, may qualify for the federal R&D tax credit. Restaurant operators should clearly document the research and development activities and accurately organize related wages, materials, and outside professional costs to maximize the credit. The R&D credit can be used through payroll tax returns to recover payroll taxes paid, making it helpful even when the business has a net loss.

4. Section 179 and Bonus Depreciation

Section 179 permits immediate expensing of purchased business assets up to a limit of $1,250,000 in 2025. Major operating assets such as kitchen equipment, POS systems, and furniture can be expensed in the purchase year for immediate tax savings. Bonus depreciation also accelerates deductions, at 40% in 2025.

5. Fully Deduct Delivery App Fees

Fees and commissions charged by delivery platforms such as Uber Eats and DoorDash are fully deductible business expenses, reducing taxable income. Because platforms deduct fees before depositing the balance, reporting sales tax or income tax solely from bank deposits can create discrepancies with Form 1099-K and increase audit risk. Bank records alone do not readily reveal the full amounts; use platform reports to reflect accurate sales and fees in tax filings.

6. Avoid Paying Sales Tax Twice

Platforms designated as marketplace facilitators, such as Uber Eats and Postmates, collect and remit sales tax directly on food sold through their delivery apps. Restaurant owners must avoid paying sales tax again on those sales. Review delivery-platform sales reports and clearly distinguish how sales tax is handled.

Carefully preparing and applying these strategies can produce meaningful cost savings and more effective tax management for restaurants. Consultation with a tax professional is recommended for a more precise plan.

Peter M. Sohn, CPA

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