The year 2017 marked the first time in 30 years that the tax law has had a significant overhaul. And for restaurant owners, the new tax law changes could mean serious financial gains. Let’s take a look at how the new tax law impact restaurant owners.
Write-Offs For Expansions
If you’re a restaurant owner who plans to upgrade existing equipment or open new locations, you may be allowed to write off your total investment on your taxes. This write-off for expansions and upgrades expires in 2023 so you’ll need to plan accordingly. But don’t just plan to save money, plan for how you can expand your business leveraging the new tax laws to your advantage. If you have a franchise, consider opening a new location and writing off the entire expense on your taxes and using the savings for reinvestment. Such strategic thinking can help provide long-term profits for your business.
Save On Personal Taxes
If your independent franchise restaurant is a pass-through company, you could save a lot of money on your personal taxes under the new tax law. The tax code updates are designed to relieve the pain of double taxation by exempting 20% of your income up to $175,000 for individual filers and up to $315,000 for couples. One of the biggest burdens facing franchise restaurant owners is the heavy tax burden. If you want to strategically benefit from the new rules around income taxation, you may want to consider planning how you will invest the money you’ve saved. Reinvesting in your business, retirement, or your children’s college fund are just a few of the many good choices. But no matter what you do, having a plan for how you will utilize that money is the best way to benefit from the new tax laws.
Inheritance Tax Relief
The new tax law makes it easier and cheaper to pass down your family restaurant to your children. Your restaurant will still be taxed at the rate of 40% but that only applies if it’s valued at more than $11.2 million for individuals and $22.5 million for married couples. The previous rules applied the 40% rate only to businesses valued at half that rate. This tax relief rule will expire in 2025.
Corporate Tax Relief
For those few those few owners using a C corporation, the corporate tax rate is experiencing a steep drop from 35% to 21% creating huge tax savings for small and medium-sized franchise restaurants. And if deductions are applied strategically, it’s possible to pay as little as 20% in corporate tax. If you work closely with your tax accountant, you can plan your deductions and investments so that you can take full advantage of the changes in the corporate tax rule. But don’t wait, planning your tax strategy now can help you improve profits and saving significantly.
These are just a few of the benefits of the new tax law. If you want to find out how your restaurant’s specific circumstances will be impacted by the new tax law, speak with an expert who understands how the industry will be impacted.
Do you have questions about how the new tax law impacts restaurant owners? Contact us today.