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Restaurant Taxes: Are You Maximizing Your 2009 Deductions and Tax Incentives?

You may find it worth your while to discuss the following with your accountant before the end of the new year. With only a couple weeks left in 2009, you'll want to make the most of available deductions by making your purchases before the end of the year.

Bonus Depreciation and Increased Section 179 Deduction under the American Recovery and Reinvestment Act

From the IRS:"The American Recovery and Reinvestment Act (ARRA), enacted in February 2009, extended the bonus depreciation and increased the section 179 deduction. For many businesses, these two provisions are only available this year and, as a result, they only have a few months to take action and save on their taxes. Here is a quick rundown of these provisions.

Many small businesses that invest in new property and equipment will be able to write off most or all of these purchases on their 2009 returns. The new law extends through 2009 the special 50 percent depreciation allowance, also known as bonus depreciation, and increased limits on the section 179 deduction, named for the relevant section of the Internal Revenue Code. Normally, businesses recover these capital investments through annual depreciation deductions spread over several years. Both of these provisions encourage these investments by enabling businesses to write them off more quickly.

The section 179 deduction enables small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009 ($285,000 for qualifying enterprise zone property and qualifying renewal community property). This limit is reduced by the amount by which the cost of section 179 property placed in service in the tax year exceeds $800,000. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sport utility vehicles. A special phase-out provision effectively targets the section 179 deduction to small businesses and generally eliminates it for most larger businesses..."

New Smallwares Accounting Method Simplifies Recordkeeping and Allows Immediate Deduction.

From the IRS:"A new IRS procedure allows restaurant and tavern owners to change accounting methods and expense the cost of replacement dishware, glassware and other items that previously had to be depreciated. The smallwares method of accounting allows restaurants and taverns to deduct the cost of these replacement items in the year purchased.

Generally smallwares consists of the following categories: glassware, flatware , dinnerware , cookware, table top items, bar supplies , food preparation utensils and tools, storage supplies, service items and small appliances costing $500 or less."

The article goes on to say that the smallwares accounting method is only for restaurants and taverns that serve food and beverages, and that it is not available for start up purchases.

Posted in: Restaurant Equipment | By Steven Ziegler
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