President Obama’s Tax Cuts are Designed to Help Restaurants and Other Small Businesses
Posted on December 24, 2010
On December 17th, President Obama signed into law the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010,” H.R. 4853. This law comes at a time of the year when many restaurant owners purchase new restaurant equipment and supplies so those acquisitions will show up on their 2010 tax statement. Lawmakers hope this law, with its $800+ billion in tax cuts will ease economic strain on small businesses so they will hire new employees and invest more in equipment and supplies.
There is some debate as to whether or not the tax cuts will actually do the things lawmakers hope, but that’s not what I’m here to discuss. I’m just want to point out three ways in which restaurants can take full advantage of this new law.
- Invest in new equipment. The law provides a 100% depreciation bonus for all new equipment purchased and placed into service between September 8, 2010 and December 31, 2011. Basically what this means is that any restaurant equipment or software that you buy in the next calendar year you get a bonus for depreciating it on your tax return, as opposed to just writing off the total cost of purchase. The depreciation bonus is intended to help you recoup more money faster and encourage you to replace old or inefficient restaurant equipment.
- Stock up on supplies. One way restaurants and other businesses try to minimize their taxes for any given year is to stock up on supplies at the end of the year so those expenses will show up on the previous year’s tax return. The new tax law didn’t change anything that would prevent restaurants from continuing to do this, so if you have the storage space available, stock up on as many kitchen supplies, restaurant disposables and janitorial supplies as you can before year-end.
- Hire new employees. No restaurant is going to hire more people when there aren’t more customers coming through the door, and a lot of owners doubt whether tax cuts will do the trick. However, the new law is trying to spur new employee hiring by decreasing income taxes for all levels of income. The law also extends the work opportunity tax credit and tax credits for empowerment zones, so restaurants located in economically stressed areas will still receive tax credits for hiring workers.
As I mentioned before, there is a lot of debate as to whether or not this new round of tax cuts will actually help. The one thing all restaurants need most is more customers coming through the door. Hopefully, by taking advantage of these tax cuts and properly preparing your restaurant for 2011, the year will be a big success.