Small Business Tax Tips for NJ Restaurants 2025: Save Thousands with These Expert Strategies

• Commercial ovens, refrigeration, POS systems qualify for 100% bonus depreciation.
• Typical 5-year depreciation schedule now deductible in year one.
• Include installation, setup, and training costs in basis.

• Dining room buildouts, kitchen renovations, flooring, lighting.
• PATH Act provides 15-year recovery period vs. 39 years for general buildings.
• Combine with cost segregation studies for maximum benefit.

• Meals provided for employer's convenience: 100% deductible through December 2025.
• Break room snacks, staff meeting food: 100% deductible.
• Important: This drops to 0% deductible starting 2026—maximize now.

• Customer entertainment meals: 50% deductible when business owner present.
• Must be ordinary, necessary, and not lavish.
• Keep detailed records: date, attendees, business purpose.

• Raw materials, packaged beverages, supplies.
• Include freight, storage, labor costs in COGS calculation.
• Proper inventory management reduces taxable income.

• Wages, payroll taxes, workers' compensation fully deductible.
• Health insurance premiums for employees: 100% deductible.
• New Low-Wage Employee Credit: $50/month per employee earning ≤$20/hour.

• Accounting, legal, marketing, consulting fees.
• Website development, POS software subscriptions.
• Essential for compliance and growth.

• Gas, electric, water, waste management, phone/internet.
• Repairs vs. improvements: repairs are fully deductible in current year.
• Insurance premiums (liability, property, workers' comp).

• Delivery vehicles: actual expenses or standard mileage rate.
• Business travel to suppliers, banks, other locations.
• Keep mileage logs and receipts.

• Website, social media advertising, print materials.
• Grand opening costs, promotional events.
• Customer loyalty programs and apps.

New Jersey charges 6.625% sales tax on all prepared food and beverages, whether consumed on-premises or takeout. No local sales tax means uniform statewide rate.

Key Compliance Points:

• Gratuities: Voluntary tips are not taxable; mandatory service charges are subject to sales tax.
• Employee Meals: Free/discounted employee meals may create use tax obligations.
• Delivery Services: Third-party platforms (Uber Eats, DoorDash) now handle sales tax collection, but restaurants must reconcile reports.

Most restaurants file sales tax quarterly, but high-volume businesses ($300,000+/month) may need monthly filing. Late penalties can reach 5% plus interest.

Eco-Taxes: New Jersey introduced packaging taxes—restaurants using biodegradable packaging can apply for tax exemptions.

• Senior Freeze Program: For qualifying senior owners
• Stay NJ Program: Up to $13,000 property tax credit for eligible homeowners
• Application deadline: October 31, 2025

• C-Corps: Standard rates with combined group filing options
• S-Corps: Reduced rates available with proper election
• LLCs: Pass-through taxation with Section 199A benefits

• Single filers: Full deduction if income under $197,300
• Married filing jointly: Full deduction if income under $394,600
• Phase-out ranges: $197,300-$247,300 (single), $394,600-$494,600 (joint)

• Sole proprietors, partnerships, LLCs, S-corporations
• Must have positive qualified business income
• Restaurants generally qualify as non-SSTB (Specified Service Trade or Business)

For higher-income taxpayers, deduction limited by:

• 50% of W-2 wages paid, OR
• 25% of W-2 wages plus 2.5% of qualified property basis

Planning Tip: Consider timing equipment purchases and wage payments to maximize this deduction. The combination of Section 199A with bonus depreciation can create significant tax savings.

While commercial kitchen equipment typically lasts 5-10 years in practice, most qualifies for 5-year MACRS depreciation for tax purposes.

• 100% Bonus Depreciation: Full deduction in year placed in service (permanent for purchases after January 19, 2025)
• Section 179: Up to $2.5 million immediate expensing
• Traditional MACRS: 5-year schedule for equipment, 15-year for leasehold improvements

• High-Income Years: Use bonus depreciation to reduce current tax liability
• Low-Income Years: Consider traditional depreciation to spread deductions
• Equipment Replacement: Plan purchases around cash flow and tax benefits

• Cooking equipment, refrigeration, dishwashers
• POS systems, computers, software
• Furniture, fixtures, signage
• HVAC systems, lighting upgrades
• Specialized utility connections (gas, water, electrical)

Separate building components into shorter-lived assets:

• Flooring, lighting, plumbing fixtures: 5-7 years
• Kitchen ventilation, specialized electrical: 5 years
• General building structure: 39 years

• State unemployment insurance (SUI)
• State disability insurance (SDI)
• Temporary disability insurance (TDI)
• Federal and state income tax withholding

• Minimum wage requirements differ for tipped vs. non-tipped employees
• Tip reporting obligations for employees receiving over $20/month
• Tip allocation rules for large restaurants (over 10 employees)

• Low-Wage Employee Credit: $50/month per employee earning ≤$20/hour (filed on Form 5884-C)
• Work Opportunity Tax Credit: Up to $9,600 for hiring from targeted groups
• Research & Development Credit: For menu development, recipe testing, workflow improvements

• File Form 941 quarterly for federal taxes
• NJ-927 for state payroll taxes
• Deposit schedules vary based on tax liability amounts

New separate reporting requirements for qualified tip income and overtime wages. Tips must be voluntary to qualify for favorable treatment.

• Daily sales reports, cash register tapes
• Purchase invoices, supplier receipts
• Payroll records, time cards, tip reports
• Bank statements, canceled checks
• Equipment purchase contracts, depreciation schedules

New Jersey accepts electronic records if they're:

• Legible and reproducible
• Stored securely with backup systems
• Accessible for audit periods (3-4 years generally)

• Cash-intensive nature of restaurant business
• Inconsistent sales tax reporting
• Large fluctuations in reported income
• Unreported cash transactions

• Use integrated POS systems that track all transactions
• Reconcile daily sales with bank deposits
• Maintain detailed expense documentation
• Consider professional bookkeeping services

• Equipment Purchases: Buy before December 31 to claim current-year deductions
• Expense Acceleration: Prepay January expenses in December when beneficial
• Income Deferral: Delay December invoicing to January when advantageous

• LLC vs. S-Corp: Consider S-election to reduce self-employment taxes on profits above reasonable salary
• Multiple Entity Strategy: Separate real estate ownership from operations

Restaurants with annual federal tax liability over $500 must make quarterly estimated payments:

• Q1: January 15, 2025
• Q2: April 15, 2025
• Q3: June 16, 2025
• Q4: September 15, 2025

• SEP-IRA: Contribute up to 25% of compensation or $70,000
• Solo 401(k): Higher contribution limits for owner-only businesses
• Employee plans help retain staff and provide tax deductions

• Build tax savings account—set aside 25-30% of profits
• Use tax refunds for equipment upgrades or expansion
• Consider financing timing around tax benefits