You’re probably leaving thousands of dollars on the table every year.
And it has nothing to do with slow nights, rising food costs, or staffing headaches.
The culprit? Tax credits you never claim.
The real problem behind that? Generalist accountants who don’t understand how restaurants actually work.
A tax credit for small businesses can make a big difference in your ability to build wealth long-term. Yet too many restaurant owners have no idea what they’re missing.
Unlike deductions that reduce your taxable income, tax credits reduce your tax bill dollar-for-dollar. That’s real money back in your pocket.
This article breaks down the credits that matter most for restaurants, from the FICA tip credit to the Work Opportunity Tax Credit to lesser-known opportunities like R&D credits for recipe development. If your current accountant hasn’t brought these up, it might be time to ask why.
Key Takeaways
- The FICA tip credit alone can be worth thousands annually for a single location, and many operators have never heard of it.
- WOTC can generate up to $2,400 per qualifying hire, with certain veterans qualifying for up to $9,600.
- R&D credits aren’t just for tech companies. Recipe development and menu testing can qualify.
- Unused credits don’t disappear. Many can be carried forward for up to 20 years.
What Is a Tax Credit for Small Business (And How It Differs From Tax Deductions)
Before diving into specific credits, it helps to understand the difference between a tax credit and a tax deduction.
A deduction reduces your taxable income. If you’re in the 25% tax bracket and claim a $1,000 deduction, you save $250.
A tax credit reduces your actual tax bill dollar-for-dollar. That same $1,000 as a credit saves you the full $1,000.
Typically, credits are more valuable. And restaurants are uniquely positioned to take advantage of several of them.
Why?
Restaurants have:
- Tipped employees,
- High turnover rates
- Capital-intensive equipment needs
- Often hire from populations that qualify for federal hiring incentives.
Yet most restaurant owners never see these savings. The reason is simple. Their accountant isn’t looking for them.
But we’ve got your back.
Here are the top tax credits to watch out for.
FICA Tip Credit
If you have tipped employees and you’re not claiming the FICA tip credit, you’re almost certainly overpaying on your taxes.
This credit allows restaurant and bar owners to recoup the employer portion of Social Security and Medicare taxes (7.65%) paid on employee tips that exceed the federal minimum wage. It’s been available since 1993, yet countless operators have never heard of it.
When your tipped employees report their tips, you’re required to pay the employer share of FICA taxes on that income. The tip credit gives you that money back as a credit against your federal income tax. You claim it using IRS Form 8846, and any unused credit can be carried forward for up to 20 years.
The numbers add up fast.
It’s not uncommon for restaurants to operate for years without ever claiming this credit simply because their generalist accountant never mentioned it. When these operators finally switch to a restaurant-focused CPA, they often discover tens of thousands of dollars in missed credits.
In 2025, the One Big Beautiful Bill Act permanently expanded the FICA tip credit, making it even more valuable going forward.
Work Opportunity Tax Credit (WOTC)
WOTC provides a federal tax credit to employers who hire individuals from targeted groups that have historically faced barriers to employment. For restaurants with high turnover, this credit can generate serious savings year after year.
According to the IRS, the credit equals 40% of up to $6,000 of wages paid during the first year of employment. That’s a maximum credit of $2,400 per qualifying employee.
The key to claiming WOTC is timing. You must submit IRS Form 8850 to your state workforce agency within 28 calendar days of the new hire’s start date. Miss that window and you lose the credit entirely. The program is authorized through December 31, 2025.
Beyond the headliners, several other tax credits fly under the radar for restaurant owners.
Disabled Access Credit
Made improvements to make your restaurant more accessible? Installing ramps, widening doorways, or adding accessible restrooms could qualify you for the Disabled Access Credit. This credit covers 50% of eligible expenses between $250 and $10,250, for a maximum credit of $5,000 per year. The IRS allows you to combine this with the Architectural Barrier Removal Deduction, which lets businesses deduct up to $15,000 per year for removing barriers.
Employer Credit for Paid Family and Medical Leave
Restaurants that offer paid family and medical leave can claim a credit worth 12.5% to 25% of wages paid to employees on qualifying leave. The One Big Beautiful Bill Act made this credit permanent starting in 2026.
R&D Tax Credit
The Research and Development Tax Credit isn’t just for tech companies. If your restaurant develops new recipes, tests menu items, or experiments with cooking processes, you may have qualifying R&D activities. The credit is worth approximately 5-10% of qualified research expenses.
If you’re planning major equipment purchases, understand how Section 179 and bonus depreciation can work alongside these credits to maximize savings.
Restaurant Revitalization Tax Credit Act Is Legislation to Watch
The Restaurant Revitalization Tax Credit Act represents potential future relief that every restaurant owner should track.
This proposed legislation was designed for restaurants that applied for the Small Business Administration’s Restaurant Revitalization Fund but never received a grant because the program ran out of funding.
When the RRF launched, it provided $28.6 billion to help restaurants recover from the pandemic. Over 177,000 restaurants applied but received nothing when the money ran dry.
If enacted, the bill would create a payroll tax credit of up to $25,000 per quarter for eligible restaurants. As of now, the bill has been introduced in Congress but has not been enacted.
Working with an accountant who tracks these developments ensures you’re ready to act when opportunities arise.
Stop Leaving Money on the Table and Find a Restaurant-Savvy CPA
From the FICA tip credit to WOTC to R&D credits, restaurant-specific tax opportunities are real. But only if your accountant knows where to look.
A generalist CPA isn’t digging into tip credit calculations. They’re not screening new hires for WOTC eligibility. They’re not tracking pending legislation like the Restaurant Revitalization Tax Credit Act.
The result? You’re overpaying on taxes while restaurant owners with specialized accountants keep more of what they earn.
Not sure how much you’re leaving on the table? Take our free 2-minute restaurant tax assessment to find out if you’re missing out on major savings.
The Restaurant CPAs connects restaurant owners and operators with accounting professionals who understand this industry inside and out. No more missed credits. No more guesswork. No more leaving money on the table.
