Do you serve up hot subs, fresh salads, and sweet treats around town in your decked-out food truck? If so, you’re part of the rapidly growing mobile cuisine industry. While it can be quite rewarding to prepare delectable edibles for hungry consumers looking for a quick bite to grab, there are several IRS tax rules you must understand to successfully run a food truck enterprise so that you avoid all potential penalties.
Check out these tax tips and deductions for food truck owners:
Tax Tips for Food Truck Operators
- You may want to incorporate your business if you work as a sole proprietor or part of a general partnership. Forming an LLC, S corporation, or C corporation can help you cut your self-employment taxes and will likely open the door to additional business tax deductions. A formal business entity also offers liability protection and can help you establish your venture as a go-to, credible food spot in your area.
- In most cases, food truck operators are required to collect sales taxes on the food they sell to customers. Of course, these sales tax rates can vary greatly from one state, city, or county to another. So, it’s critical to be fully aware of where you are opening up your food truck for the public to enjoy. Be sure you document the addresses of the locations where you’re serving up your tasty offerings so you’ll know what the sales tax rate in each location is.
- Food truck owners can either deduct the standard mileage rate or actual expenses of their vehicles—not both. If you claim mileage you drive for business purposes as a write-off to travel to each location you visit, use a mileage log to track your travels. If you claim actual expenses, this deduction amount may include vehicle maintenance, oil, fuel, and tolls. Determine which IRS vehicle deduction option will result in the biggest tax savings for you.
- Don’t forget about paying your estimated taxes, self-employment taxes, and any other tax liabilities for which you’re on the hook as a business owner. These unique tax requirements generally apply to all types of business structures, although requirements can vary, so make sure you’re aware of your duties.
- In terms of tax savings, it may be best to depreciate some of your higher-priced investments as a food truck business owner, such as your truck, a generator, and cooking appliances that exceed $500. Otherwise, it’s often best to deduct smaller purchases in your business one time on your tax return for the year in which you bought them rather than depreciating them over the course of several years.
- To write off employee pay and benefits, this compensation must be provided for actual work that your employees perform. If the IRS says you are overcompensating employees, it may not be fully deductible. Many food truck operators conduct the actual cooking and serving themselves, so this may not apply in all cases. However, in any business, you must pay yourself a “fair and reasonable salary,” even if you’re the only employee in the venture.
Tax Deductions for Food Truck Operators
As the operator of a food truck business, you can deduct the following business expenses on your income tax return:
- The truck or other types of vehicles you use to transport your food and beverages
- Food supplies, i.e. bread, lunch meat, lettuce, salad dressing, fruit, ice cream, spices, olive oil, etc.
- Beverages, i.e. water, milk, fruit juice, tea, beer, wine, liquor, etc.
- Cooking, cooling/heating equipment, i.e. portable refrigerators, grills, ovens, blenders, toasters, etc.
- Other supplies, i.e. pots, pans, dishes, spatulas, etc.
- Eating/drinking supplies, i.e. paper plates, cups, bowls, platters, utensils, etc.
- Marketing costs, i.e. menus, a website, social media marketing, signage on your truck, etc.
- Location rental fees to set up your food truck in places that charge a fee
- Employee salaries, insurance, retirement accounts, sick leave, vacation pay, bonuses, etc.
- Maintenance expenses for repairs on your food truck or equipment
- Fees for professional services, i.e. truck detailing, accounting, legal support, etc.
- Depreciation on property