Serving Up Savings: Tax Tips for Food Truck Owners
Do you feed hungry customers in your food truck? If so, you’re part of the mobile food industry found in major U.S. cities where people are eager to grab a quick bite for a reasonable price.
While making money cooking up tasty treats can be enjoyable, there are federal, state, and local tax rules that apply to running a food truck business.
6 tax considerations for food truck owners
1. Consider incorporating your food truck business if you currently have a sole proprietorship or partnership
By establishing a formal business entity, such as an LLC, S corporation, or C corporation, you can help cut your self-employment taxes in half. You can also open your business up to additional corporate tax deductions and tax-saving strategies.
Additionally, maintaining a formal business entity adds liability protection to your operation and can give your business more credibility in a highly-competitive industry.
2. You may be responsible for collecting sales taxes on the food and beverage orders you take
These sales tax rates often vary from state to state, so it’s imperative to be aware of your specific state’s business tax laws.
In fact, rates may differ between cities or counties within a state. Make sure you properly document each address where you set up your food truck to help track where you’ve been and what you owe.
3. Choose how you want to deduct the trips you make with your food truck
Because food truck owners are frequently on the go, deducting transportation expenses can result in big tax savings.
You can either deduct actual mileage or actual vehicle expenses. However, you cannot deduct both.
If you claim mileage as a write-off, remember that the standard mileage rate for 2016 was 54 cents per mile, and 53.5 cents per mile for tax year 2017. Track your business-related trips in a mileage log.
If you deduct actual vehicle expenses, your deductible amount may include gas, maintenance, oil, and tolls. Calculate both options to find the biggest tax savings.
4. Keep all tax requirements and deadlines on a calendar to fulfill your obligations as a business owner
Remember your estimated tax payments, self-employment taxes, and other filings you must complete.
If you have employees, you’re responsible for withholding taxes from their paychecks and submitting these amounts to the appropriate tax agencies. Payroll taxes are part of this process.
5. You can take one-time deductions on expenses, but it’s generally smarter to depreciate certain items in your food truck business
Higher-priced items, such as your food truck, large appliances, refrigeration, and a generator, may be depreciated over time rather than deducted in one year.
In many cases, items costing more than $500 should be depreciated over several tax years for the largest tax savings.
6. Overcompensating employees can reduce tax savings
If you have employees and want to deduct their pay and benefits, provide them with compensation only for the actual work they do.
The IRS may take issue with overcompensation of employees, and not all pay and benefits may be deductible if the IRS determines so.
Tax deductions for food truck owners
Food truck owners can write off the following business-related expenses when filing income tax returns with the IRS:
– A food truck or other vehicles used to transport food supplies, beverages, and other items.
– Food supplies sold directly or used in the preparation of menu items.
– Beverages.
– Heating appliances.
– Cooling appliances.
– Cooking supplies.
– Eating and drinking supplies.
– Marketing expenses.
– Location rental fees when applicable.
– Employee compensation.
– Maintenance expenses.
– Professional service fees.
– Depreciation on business property.
– Insurance on business property and for liability purposes.
A food truck business may seem straightforward in terms of expenditures. However, there are hidden costs and fees that don’t always emerge when considering any food service enterprise.
Regardless of your menu offerings, there are tax-saving moves you can make to keep more of your hard-earned income in your business bank account. The key is to know which methods apply to your food truck business.
Knowing how to navigate your tax obligations can be a huge boon for the viability of your food truck business.
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