Regulations and standards for food trucks differ significantly from state to state, city to city, and even neighbourhood to neighbourhood. A food truck business may seem quite straightforward at first but there are many implicit and hidden costs that you might overlook while considering the expenses. Every trailer, kiosk, and food truck, on the other hand, is obligated to pay taxes.
Regardless of the exact type of business, the amount you pay will be mainly determined by how well you use the tax deductions available to you. You can manage your food truck business in the most cost-effective way possible if you know what to deduct and other critical tax-related concerns. There are numerous tips that can help you in saving on these costs and surviving in this industry.
This article lists out 4 pro-tax tips for food truck owners to save some extra money on taxes which then can be reinvested or kept for personal use.
Get Started With Your Food Truck With These Pro-Tax Tips
Get familiar with the four food truck tax tips below to safeguard your food truck business from tax penalties–and perhaps save some money on your tax returns
1. Your Business Setup Matters
When starting a food truck business, many new owners choose to operate as a sole proprietorship. Sole proprietors report all the income their businesses make. In other words, you will be taxed on your earnings, but you will be entitled to deduct certain company costs. Register your company as a separate legal entity in case you are a sole proprietor. This would make your business a separate legal entity with an identity of its own, which could result in halving your self-employment taxes and give you the benefit of numerous other corporate deductions and tax-saving strategies. Further, with limited liability, it would go a long way in protecting your future in case of insolvency.
2. Depreciation Of All Sorts
To establish a food truck, you’ll need to invest in some expensive equipment, which may cost thousands of dollars. Grills, ranges, ovens, generators, and other major pieces of equipment must all be of standard quality, in addition to refrigeration systems. Instead of depreciating the cost of new company equipment over several years, food truck operators can completely deduct a restricted portion of the cost from taxable income in a single year. However, a general rule of thumb is that if a piece of equipment costs over $500, then it’s more advisable to depreciate it instead of taking a deduction as you will be able to get a larger sum as compared to a lump-sum deduction.
Advertising expenses, employee benefit plans, insurance, legal and professional services, dues payable to industry groups are all popular food truck tax deductions. The Government enables you to either deduct your real food truck tax-related expenditures such as maintenance or utilize the normal mileage rate since you utilize a vehicle for your mobile food company. You can deduct a certain amount of money for each business mile you drive. Keep track of everything, including receipts and other evidence of payment, when it comes to deductions.
3. From Location To Location
Even though many food truck owners stay in their immediate region, others travel across the country to participate in festivals and competitions. Attending various festivals and concerts will land you some of your largest customers and possibly land you a spot on a list of America’s top food trucks. Crossing state borders necessitates paying for your own accommodation and meals, and not to mention fuel. You can deduct these expenditures from your taxes each year if you keep track of them, including receipts and departure and return dates. Saving receipts can also help you save on sales tax as different rates of sales in different locations can cause confusion in how much you owe to respective authorities.
4. Insurance Saves Money
The number of food trucks in the United States roughly doubled between 2013 and 2018, and for all good reasons. Owning a food truck requires a relatively low startup cost and offers location flexibility, and customers can’t get enough of affordable roadside cuisine. As the owner of a food truck, you are required to purchase several types of business insurance to protect yourself, your business, and other people. As you work on your food truck business strategy, you’ll want to start looking for the best food truck insurance for your needs.
It is imperative as a food truck owner, or for any businessman, to implement tax-saving measures to ensure their survival in their respective industries. However, it does not mean a businessman should cheat on their taxes and pay less than what they are supposed to.