Are you concerned about your food truck taxes? If yes, you are a significant part of the in-demand mobile food industry—with an estimated 7.5% annual growth rate—standard in major and minor cities across the US. However, while making money by preparing tasty meals at your convenience can be nice, be ready to comply with lots of state, federal, and local tax ordinances, as well as manage your food truck financing.
Complying with food truck taxes keeps your business fully operational and avoids the consequences of tax noncompliance. Below is a guide on filing your taxes and deductions you don’t want to miss.
Food Truck Taxes: Tax Deductible Expenses
The costs of running your food truck business are deductible if they are ordinary and necessary. However, before defining these terms yourself, ensure you study the IRS’ definition of ‘regular and mandatory. Here are some of the standard deductions you should focus on to make the most of filing your taxes:
- Business expenses
- Equipment purchases
- Vehicle expenses
- Business Expenses
The costs of running a food truck include ongoing operational costs. Such operational costs may consist of the actual cost of food you prepare or the rent you pay for in a community kitchen. While some daily operational costs may not be considered hefty tax deductions, they may pile up over time.
Therefore, ensure you track all these minor daily expenditures, and you will be amazed at how sizable the tax deduction will be at the end of the tax year. Such costs may include:
- Food purchases
- Advertising costs
- Employee salaries and wages.
You can deduct a limited amount of the cost of purchasing new business equipment—from taxable income—in a year instead of depreciating the cost over time. Whether you need new ranges, grills, generators, ovens, or any large business equipment, you can claim a sizable, one-time tax deduction. Ensure you write it off when filing your taxes.
Vehicle-related expenses are part and parcel of operating a food truck business. The Internal Revenue Service (IRS) permits you to claim the standard mileage rate or deduct the actual food truck tax-related expenses. The standard mileage rate is a specified amount of money you can deduct for each business mile you drive.
When preparing to file your food truck expenses, ensure you keep a log of all the miles you cover with the track. Additionally, keep track of related costs such as parking fees and tolls since these may amount to a sizable deduction.
It is possible to get tax deductions on expenses you incur when traveling for your food truck business. Ensure you keep logs and records showing the amount of every expense during your trip, whether accommodation, meals, or transportation. Additional crucial information you need to keep track of includes the exact period of the travel, essential locations, and venues—in case of a meeting—or the reasons for your travel.
Take Advantage of Your Deductions
Taking advantage of tax deductions when filing your food truck taxes helps reduce a certain amount from your taxable income and save plenty in tax. Are you planning on setting up a food truck business? Reach out to us to advise you on setting up a food truck business, including every critical business component such as financing and filing taxes.