Featuring insights from Adam Berebitsky, CPA — Former Partner-in-Charge of BDO’s National Restaurant Practice
As the fourth quarter winds down, restaurant operators juggle the holiday rush, last-minute hiring, vendor pressures, and unpredictable guest traffic.
But tucked inside the year-end chaos is one of the most powerful opportunities of the year:
What you do between now and December 31 —not what happens during “tax season”— determines how much you keep and how much you hand over to the IRS in April.
To help operators make smarter decisions, we partnered with Adam Berebitsky, CPA, former Partner-in-Charge of BDO’s National Restaurant Practice and one of the industry’s most respected restaurant tax experts.
His insights bring real-world clarity to what matters most before year-end.
1. Make Smart Capital Asset Investments
If you’re planning equipment purchases, technology upgrades, or store improvements in early 2026, accelerating those investments into December can unlock significant tax savings.
Under Section 179 and bonus depreciation rules, assets must be placed in service—delivered, installed, and ready for use—before December 31 to qualify for the full deduction this year.
The operative phrase?
Placed in service.
Payment alone does not qualify an asset for a deduction.
To receive the deduction in 2025, the asset must be:
- Delivered
- Installed/assembled
- Fully operational
By year-end to take advantage.
If an item is paid for in December but installed in January, the deduction shifts to next year.
For example, say you plan to replace a $6,000 prep table in February. If it’s delivered and installed before 12/31, you may fully deduct it this year. If it arrives on January 3rd, the deduction moves to next year.
Or, you may want to upgrade guest Wi-Fi, tablets, and POS hardware. This is a super simple thing to do at year-end because these assets ship quickly, require minimal installation, often cost < $2,000, and are easy to place in service.
Both scenarios are perfect candidates for year-end tax savings.
Here’s why this matters so much for operators: you could save a boatload in taxes.
Adam explains:
“If you’re already planning improvements in the next six months, accelerating them into Q4 can effectively reduce your after-tax cost by 30-40%. And if you finance the project, the cash outlay today may be minimal while you still capture the full deduction.”
2. Maximize Your FICA Tip Credit Before Year-End Payroll Runs
The FICA Tip Credit is one of the most valuable incentives available to restaurants—yet one of the most misunderstood.
The credit is based on tips your employees earn above a federal statutory base wage of $5.15/hour.
Many payroll teams incorrectly use today’s minimum wage, which can significantly reduce the credit.
Here’s what to review:
- Ensure payroll uses the correct $5.15 statutory base
- Separate service charges from tips
- Validate POS tip mapping and tip pooling rules
- Review tip reporting closely during the holiday rush
Adam noted, “With minimum wages rising, many employees earn well above $5.15 before tips — meaning nearly all tips qualify for the credit. But only if the calculation is set up correctly.”
These are his non-negotiables:
- Clean up POS mapping & payroll alignment: Year-end tip volume spikes dramatically in December. This is the month when reporting errors have the biggest impact on your credit, making a strong backoffice process essential.
- Ensure your systems are set up to capture tips: Because tipping screens are now standard at fast casual and counter-service restaurants, many establishments that previously had no tipped employees now have workers regularly receiving tips—making operators newly eligible for the FICA Tip Credit, even if they didn’t qualify in prior years.
3. Capture Remaining 2025 WOTC Credits for Q4 Hires
The Work Opportunity Tax Credit (WOTC) remains one of the most overlooked tax benefits available to restaurants— and 2025 is the final year to take advantage of it unless Congress extends the program.
For restaurants that hire continuously, WOTC can generate significant savings simply by applying the screening required to claim the credit.
Because the credit applies only to new hires, Q4 becomes an important window to capture incremental value as you staff up for holiday volume.
Here’s what to watch out for:
- Confirm WOTC screening is included in every onboarding packet
- Ensure managers understand the 28-day submission window
- Verify your HR/payroll system is configured to support WOTC filings
The 28-day mark is really crucial here.
Say you hire several team members on December 12. You have until January 9 to submit their Form 8850 screenings.
Or maybe you hired two employees in November. If you’re still within 28 days of their start dates, you can submit Form 8850 now and still qualify for the credit.
Adam emphasizes, “You can’t retroactively qualify someone hired months ago. To claim WOTC, employers must submit IRS Form 8850 within 28 days of the employee’s start date. If that form isn’t part of onboarding at hire, the credit is lost. And with WOTC sunsetting after 2025, operators should capture every eligible hire this year.”
Yes, chef.
4. Review Repairs vs. Improvements Before They Hit Your Return
Year-end is the perfect time to review how you’ve classified equipment fixes, maintenance projects, and small upgrades throughout the year.
This isn’t just semantics. The distinction between a repair and an improvement directly impacts your tax bill:
- Repairs are typically deductible immediately
- Improvements must be capitalized and depreciated
This is one of the most common areas where operators unintentionally overpay taxes.
Throughout the year, small projects add up— HVAC fixes, replacement parts, cosmetic updates, equipment components— and many of these can (and should) be expensed immediately.
Fun fact: Replacing individual components like fryer parts, refrigeration compressors, HVAC motors, POS tablets often qualifies as a repair. So do things like fresh paint, tile patching, or drywall touchups.
With margins tightening across the industry, getting this classification right can materially reduce taxable income.
Be sure to check out:
- Equipment work orders and invoices
- Small-dollar POS or technology purchases
- Minor cosmetic or maintenance updates
- Items previously capitalized that may qualify as repairs
Adam tells us, “Under various safe-harbor rules, many smaller purchases—often up to $5,000 per item—can be expensed immediately. Operators often assume these must be capitalized, when, in reality, they qualify as repairs. A quick year-end review can unlock deductions most restaurants don’t realize they’ve earned.”
If anything like this was capitalized earlier in the year, reclassifying them before filing can reduce your taxable income—and who doesn’t want that?
5. Use the Accelerated Charitable Deduction for Donated Inventory
Many restaurants donate surplus food throughout the year, like pastries and produce to catered items after events.
But most operators don’t realize the IRS offers an enhanced charitable deduction for qualified food donations.
Unlike a standard deduction, which only lets you write off the cost of goods donated, the enhanced deduction lets you claim:
Cost + ½(Fair Market Value – Cost)
This often results in a deduction significantly higher than cost alone.
Here’s what you’ll need to qualify:
- All food donations made to qualified 501(c)(3) organizations
- Records from food rescue partners and community groups
Adam highlights, “Larger brands often use third-party firms to calculate this because the deduction can be substantial. Smaller operators often don’t even realize they qualify. When applied correctly, the enhanced charitable deduction can deliver significantly more value than simply writing off excess food at cost.”
Let’s check his math.
Say you’ve got a pan of food costing $40 that would normally sell for $120. This item qualifies for an $80 deduction (twice the cost) using the IRS formula.
Nice.
6. Revisit Year-End Payroll, Owner Compensation, and Tax Positioning
For many restaurant owners, year-end payroll planning is one of the most overlooked—yet most impactful—tax moves available.
The way you structure final wages, bonuses, and contributions before December 31 can influence both business taxes and your personal tax outcome, especially if you are an S-Corp owner, partner, or sole owner with flexibility in how income flows to you.
For example, S-Corp owners who raise their wages slightly may strengthen QBI eligibility; reducing them may avoid unnecessary payroll taxes. A quick year-end model from your CPA can determine the ideal number.
A year-end retirement plan contribution (even a modest one) can significantly reduce taxable income. Solo 401(k) plans in particular allow owners to contribute both as “employee” and “employer,” allowing for higher deductions. But you’ve got to contribute in December to take advantage of savings this tax year.
As Adam says, “Most owners wait until tax season to talk about compensation and retirement contributions, but by then the window is closed. The smartest operators evaluate their actual year-to-date income in December and model a few scenarios. For many, a simple change in year-end wages or a retirement contribution can make a meaningful difference.”
What to review before 12/31:
- Your projected taxable income for the year
- Timing of distributions vs. wages vs. bonuses
- Whether to issue owner bonuses before year-end
- Retirement plan contributions (SEP, SIMPLE, Solo 401k, etc.)
These decisions, when handled correctly, can save thousands.
If You Don’t Act Now, You Will Miss Out
Every year, restaurants leave thousands of dollars on the table simply because key year-end tax moves weren’t made in time—or because their accountant didn’t specialize in restaurants and didn’t know what to look for.
All six of the strategies in this guide share one thing in common:
They only work if you take action before December 31.
At that point, even the best accountant can’t unwind missed deadlines or recover credits you never claimed. The money is simply gone.
This is where the right accountant makes the difference.
That’s exactly why The Restaurant CPAs exists.
RCPA connects restaurant operators with vetted accounting firms that specialize in this industry—firms that understand the timing, nuances, deadlines, and decisions that materially impact taxes at year-end.
If you wait until tax season, it’s already too late.
But if you take action now, you can still capture every major tax benefit available to restaurant owners.
RCPA can help you do that today.
