The 2026 Guide to Filing Restaurant Taxes: Tips and Advice

In 2025, we saw a surge in Employee Retention Credit (ERC) refunds issued by the IRS and the passage of the One Big Beautiful Bill Act (OBBBA), which includes beneficial tax incentives for restaurants. Fortunately, there’s even more you can do to improve cash flow and mitigate your restaurant taxes this upcoming tax season. 

TouchBistro has enlisted the help of the experts at The Fork CPAs to provide tax tips for restaurant owners and to help them head into tax season with a strategic cost-savings plan. Rather than simply helping you organize your tax documents and understand the basics of filing taxes for a restaurant, this article will provide a comprehensive roadmap for taking advantage of proven tax strategies and restaurant tax deductions to reduce taxes and increase cash flow in your restaurant. These are the same strategies used by the seasoned accountants at The Fork CPAs to reduce restaurant taxes for hundreds of operators, both big and small. By the time you’ve read our full restaurant tax guide, you’ll have:

• A list of important U.S. restaurant tax deadlines for 2026
• A breakdown of tax incentives and tax deductions for restaurant owners
• A step-by-step action plan for increasing restaurant cash flow during tax season

DISCLAIMER: This content is provided for informational purposes only. You are responsible for your own compliance with laws and regulations. Contact your attorney, accountant, or other relevant advisor for advice specific to your circumstances.

Important Deadlines for Restaurant Taxes in 2026

Before we jump into our comprehensive restaurant tax guide, we’ll start by summarizing the upcoming restaurant tax deadlines so you can plan accordingly. 

February 2, 2026:

• 2025 Form 1099-NEC E-filing and delivery deadline
• 2025 Form 1099-MISC delivery deadline

March 16, 2026:

• 2025 Federal Partnership tax return or extension
• 2025 S-corporation tax return or extension

March 31, 2026:

• 2025 Form 8027 for tipped establishments
• 2025 Form 1099-MISC E-filing deadline

April 15, 2026:

• 2025 Federal Individual tax returns or extension
• 2025 Federal C-corporation tax returns or extension
• 2026 Federal Q1 Individual tax estimated payments

June 15, 2026:

• 2026 Federal Q2 Individual tax estimated payments

September 15, 2026:

• Extended 2025 Federal Partnership tax return
• Extended 2025 S-corporation tax return
• 2026 Federal Q3 Individual tax estimated payments

October 15, 2026:

• Extended 2025 Federal Individual tax returns
• Extended 2025 Federal Corporation tax returns

These are U.S. federal tax deadlines, however, state tax deadlines vary from state to state, so make sure you’re aware of all applicable deadlines for your specific business.

*As of the date of writing this article, there are no drafted or outstanding bills in Congress that make us believe the contents of this article will change before the tax filing deadlines. 

6 Steps to Increase Restaurant Cash Flow During Tax Season

Now that you know the timeline for filing your restaurant taxes this year, let’s review a simple, six-step approach for reducing taxes and increasing cash flow in your restaurant or restaurant group. This comprehensive guide includes taking advantage of tax incentives, essential tax deductions for restaurant owners, tax filing strategies, and other opportunities available to restaurants. 

Step 1: Choose Your Tax Entity Wisely

Assessing your tax structure every year is always a good idea. For legal purposes, you are most likely registered with your state as a Limited Liability Company (LLC) or Corporation (Inc.). However, this doesn’t necessarily lock you into a specific entity type for tax purposes. For tax purposes, a multi-member LLC can choose to be taxed as an S-corporation, corporation, or partnership; a corporation can choose to be taxed as a C-corporation or S-corporation; and a single-member LLC can choose to be taxed as an S-corporation, C-corporation, or not file a separate business tax return at all (file Schedule C on your personal returns). 

Each year, consider whether a partnership, C-corporation, S-corporation, or Schedule C tax filing will benefit you in the long run, based on your profit, goals, state of residence, and personal tax situation. Navigating the pros, cons, and nuances of each entity type is complex, but we have simplified it with a step-by-step process here. 

Step 2: Accounting Method Change

An accounting method change allows you to convert the method you use to calculate your taxable income from a cash to an accrual basis. But it also allows you to correct an error on a previously filed tax return. There are over 100 accounting method changes; some require IRS approval, and some are automatic. There are two automatic accounting method changes that you must consider this year:

1. If you are a cash-basis taxpayer, make an accounting method change to convert your accounting method to an accrual basis. Accrual basis accounting allows you to deduct your outstanding accounts payable (bills you have been issued but not yet), and accrued payroll (payroll you have incurred but not yet paid) at the end of the year. This allows you to claim a deduction for expenses accrued but unpaid at year-end. Accrual basis accounting requires recognizing your accounts receivable (amounts invoiced but not yet received) in your taxable income at year-end. However, since restaurants have few accounts receivable, accrual basis accounting is more advantageous. 
2. Confirm that you have claimed a bonus depreciation on all fixed assets placed in service between September 28, 2017, and December 31, 2024. If not, you can use an accounting method change to retroactively claim that depreciation in 2025, thus lowering your taxable income. Before claiming bonus depreciation retroactively, you’ll want to ensure it’s not going to tie up your losses at the individual level, given the recent excess business loss and NOL limitations. Please refer to Maximizing Bonus Depreciation and Section 179 Depreciation Deductions for Your Restaurant to strategize accordingly. 

You must file Form 3115 to make the accounting method changes mentioned above. Your tax preparer may not know these strategies, so we recommend bringing it up to them! 

Step 3: Claim Sec 179 and Bonus Depreciation Strategically

Since 2018, restaurants have had the luxury of deducting 100% of their build-out costs and other fixed asset purchases, such as equipment and furniture, by claiming bonus depreciation on their tax returns. Starting in 2023, restaurants no longer had this luxury. Bonus depreciation was phased out to 80% in 2023, 60% in 2024, and 40% from January 1 through 19, 2025. After January 19, 2025, bonus depreciation has been resurrected to 100%, meaning you can fully write off qualifying fixed asset purchases in the year placed in service, versus depreciating over their useful lives. 

Sec 179 depreciation is a similar tax incentive that allows you to write off 100% of your fixed asset purchases, except the Section 179 deduction cannot generate a loss for your business, which allows you to apply that loss against other sources of taxable income; and it has a limit. The OBBBA recently increased the Section 179 deduction limit to $2,500,000 with a phase-out threshold of $4,000,000, This means you can write off up to $2,500,000 in fixed asset purchases in the year placed in service, but the write-off begins to phase out once your total fixed asset purchases exceed $4,000,000. Section 179 is also only deductible to the extent the owner or partner in the business has income from the active conduct of a trade or business (such as non-passive business income, W-2 wages, etc.). Therefore, it is typically more beneficial to claim 100% bonus depreciation for Federal tax purposes, and most accountants do so by default. 

While it may seem like claiming bonus depreciation is more advantageous than Section 179, there could be a downside to claiming bonus depreciation. If bonus depreciation results in a loss for your business (something Section 179 can’t do, as mentioned above), and you don’t have other income on your tax return that can absorb those losses, they will carry over and be subject to the NOL loss limitations. This restricts the amount of loss you can claim in a carryforward year to 80% of taxable income. 

On the contrary, if there are other sources of taxable income that can absorb the losses, there are also limits on how much loss you can claim from your business each year. The limit for 2025 is $313,000 for single filers and $626,000 for married filers. For example, assume your restaurant generates a $500,000 loss that flows through to your personal tax returns, and you also have $200,000 of W-2 income and $300,000 capital gain. You can only claim $313,000 of loss that year against the $500,000 of W-2 and capital gain income, and the rest gets carried over to the future as an NOL, thus making it subject to the NOL limitations explained above. Section 179 allows you to claim a 100% deduction for the assets placed in service and carry forward any amount that generates a loss to future years. Section 179 can also be applied on a property-by-property basis, and you can elect to expense only part of a property’s cost, rather than the entire amount. Therefore, giving you flexibility around when you take your deductions in case you want to defer them to the future to strategically offset your other sources of taxable income. Realistically, this type of tax planning can only be accomplished for restaurants with very few owners who actively manage the business. Otherwise, bonus depreciation is still your best bet. Here is a step-by-step process to strategically optimize your Section 179 and bonus depreciation deductions, rather than relying on the limited bonus depreciation deduction. 

Also, many states don’t allow you to claim bonus depreciation or the Section 179 deduction; therefore, it is added back to your state taxable income, resulting in a large state tax compared to the federal tax you may owe. The opportunity here is that some states, like Virginia, allow you to claim a limited amount of Section 179 deduction, but not the bonus depreciation deduction. As a result, you could allocate a portion of your depreciation to Section 179 instead of bonus depreciation if it benefits your state taxes and is not detrimental to your federal taxes.

In conclusion, make sure you or your accountant considers the state tax implications of accelerated depreciation when choosing how to depreciate your improvements or fixed asset purchases.  

Step 4: Elect to Pay State Tax at the Entity Level

After the Tax Cuts and Jobs Act (TCJA) of 2017, most taxpayers can no longer claim a personal-level deduction for state and local income taxes they pay because the state and local tax deduction limit was set at $10,000. As a result, many state and local authorities have passed legislation that allows pass-through businesses (partnerships and S-corporations) to pay state and local income tax at the business level instead of at the owner level, so they can claim a federal tax deduction for their state and local taxes paid. The option to pay state and local tax at the entity level is typically referred to as a pass-through entity tax (PTET) election. However, the OBBBA increased the state and local tax deduction from $10,000 to $40,000 temporarily from 2025 to 2029. Therefore, the PTET may no longer be as beneficial, but it should still be strongly considered when preparing your state income taxes. 

When preparing your state business income tax returns, you should determine whether your state is offering this opportunity and whether it will benefit you. The most complex state that allows this is NY and NYC; therefore, we have drafted a step-by-step process for doing this in NYC and NY. 

Step 5: Prepare your taxes strategically

In this step of our restaurant tax guide, we’ll highlight some of the most standard and popular federal restaurant tax incentives. 

FICA Tip Credit

We can’t write an article about restaurant taxes and not mention the FICA tip credit. The FICA tip credit allows tipped establishments (defined by the IRS) to claim a dollar-for-dollar tax credit for any social security and medicare taxes paid on their employee’s tip income in excess of the federal minimum wage. Almost every full-service restaurant where tipping (not service charges) is customary qualifies for this credit. This credit is usually substantial since most tipped employees get paid well in excess of the federal minimum wage, especially in high-cost places like NYC, D.C., and San Francisco.

Tenant Improvement Allowances

Tenant Improvement Allowances, more commonly referred to as “TI,” are landlord incentives to get tenants into a new space by providing an allowance for construction or equipment. These incentives are not going anywhere, yet the tax implications are frequently misunderstood. The tax treatment of the allowance and resulting improvements depends on who owns the improvements. Generally, if the tenant is the owner, the restaurant is taxed on the entire allowance in the year it is received. To avoid this, restaurants can make a Section 110 disclosure on their tax return to claim their lease is a short-term retail lease.

You should ask your accountant to confirm whether you qualify for this exception. If the landlord is the owner, then the allowance can typically be applied toward the cost of the leasehold improvements, thus reducing the depreciation deduction.

Discerning ownership of leasehold improvements is determined by the lease, therefore the tax implications should also be taken into consideration during the lease negotiation and drafting process. 

Partner Classification

If your restaurant or restaurant group is structured as a partnership, this is a good time to assess whether the classification of your partners could help them save on taxes. Assuming you are legally structured as an LLC, you can classify your partners as LLC Member-Managers or Other LLC Members on their Schedule K-1s (the form they receive from the business reporting their share of business income). Classifying a partner as an LLC Member-Manager triggers self-employment tax on their earnings from the business. Therefore, you want to ensure that mere investors are not misclassified as LLC Member-Managers. Although there is no clear definition of a mere investor, the IRS says a mere investor is a partner with limited liability who didn’t perform extensive services for the partnership. 

Step 6: Ensure the Employee Retention Credit (ERC) is treated appropriately

If you’re a restaurant, you most likely received the ERC between 2021 and 2025 due to claiming it in 2020 and 2021. 

If you received ERC payments in 2025, you can treat these as tax-exempt income because you should have reduced your salaries and wages deduction by the ERC amount in the year to which the ERC relates. Most accountants are aware of the tax treatment of ERC income, but you should still keep an eye out in case it’s missed and/or you switched tax preparers between 2020/2021 and 2025, and the new tax preparer may not be aware that you claimed the ERC as nondeductible wages in the year they relate to. 

Ongoing Planning for Tax Season

By understanding how to file taxes for a restaurant strategically and applying these tax tips for restaurant owners, along with restaurant tax deductions, incentives, and strategies, you can reduce your taxes and increase cash flow in your restaurant during tax season. However, restaurant tax planning should be done throughout the year by giving your accountant real-time access to accurate financials. To get real-time access to accurate financials without breaking the bank, it’s essential to implement state-of-the-art technology like TouchBistro and MarginEdge in your restaurant, and to work with an accountant and bookkeeper who can integrate all of these systems together to produce data that will help you manage your restaurant’s budget, improve operations, and plan strategically for filing your restaurant taxes. Plus, you can always visit The Fork CPAs blog for some helpful tips along the way.

by Raffi Yousefian

Raffi is a CPA and CEO of The Fork CPAs. The Fork CPAs provides restaurant owners with frictionless, streamlined, and modern restaurant bookkeeping and tax services. They believe that with the appropriate technology and accountant, restaurants of all sizes can access the same financial data as national restaurant chains. When he’s not crunching numbers, Raffi enjoys the gym, skiing, music, and consuming delicious food, beer, and wine.

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