The short answer is most of what you spend to operate the restaurant is deductible. The longer answer involves knowing what category each expense falls into and keeping documentation that survives an audit.

Cost of goods sold is your biggest deduction. Everything you buy to make food and drinks: proteins, produce, dairy, dry goods, alcohol, paper goods for takeout. This isn’t technically an expense deduction. It reduces your gross revenue before you calculate profit. The distinction matters for how it shows up on your tax return but the effect is the same. You don’t pay taxes on money you spent on product.

Labor costs are fully deductible. Wages, salaries, employer payroll taxes, workers’ comp insurance, health insurance contributions, retirement plan contributions. If you’re paying it because you have employees, it’s deductible. Tips you pay out aren’t your expense since that’s customer money passing through, but the payroll taxes you pay on reported tips are deductible.

Rent is deductible. So are utilities, trash pickup, and common area maintenance fees. If you’re paying a percentage of sales as part of your lease, that’s deductible too. Same with property taxes if you own the building, though most restaurant owners in Richmond are leasing.

Equipment and furniture get deducted but not always in one year. Big purchases like a walk-in cooler, a new POS system, or a dining room renovation are capital expenses. You either depreciate them over several years or use Section 179 to deduct them immediately. The rules around this change often. Your accountant should be handling this part.

Smallwares and supplies are deductible in the year you buy them. Plates, glasses, utensils, cleaning supplies, uniforms, linens. Things that wear out and get replaced regularly. Keep these receipts organized because they add up to real money.

Marketing and advertising are fully deductible. Your website, social media ads, print menus, signage, promotional events. If you’re paying an agency or freelancer to handle marketing, that’s deductible too. Sponsoring a little league team in Chesterfield or buying an ad in a local publication counts.

Professional services are deductible. Your accountant, your lawyer, your bookkeeper. Consulting fees. The guy who comes in to fix the espresso machine. Anyone you pay who isn’t an employee.

Credit card processing fees are deductible. So are delivery platform commissions from DoorDash, Uber Eats, and the rest. These fees eat into margin significantly, so at least you’re not paying taxes on that money too.

Insurance premiums are deductible. General liability, liquor liability, property insurance, business interruption insurance. Health insurance for yourself if you’re a sole proprietor or partner gets handled differently but is still deductible.

Repairs and maintenance are deductible in the year you pay them. Fixing the HVAC, patching the roof, repairing equipment. Improvements that extend the life of an asset or make it more valuable get capitalized instead of expensed immediately.

Licenses and permits are deductible. Your Virginia ABC license, health department permits, business licenses, music licensing fees for BMI and ASCAP. These recurring costs of staying legal and operational all count.

Training costs are deductible. Sending a cook to a class, bringing in a consultant to train staff, certification programs. Investing in your team is a business expense.

Business meals are partially deductible but the rules are specific. Taking a vendor to lunch to discuss pricing: 50% deductible. Staff meals provided during shifts: usually 50%, sometimes 100% depending on circumstances. Your own meals while working: generally not deductible unless you’re traveling for business.

What’s not deductible: fines and penalties, political contributions, personal expenses you’re running through the business, and the federal income taxes you’re paying. Virginia state income taxes are deductible on your federal return if you itemize personally, but that’s a different conversation.

The deductions only work if you can prove them. Keep receipts. Use a business bank account and credit card so everything is documented. Categorize expenses correctly in your restaurant bookkeeping so your accountant doesn’t have to guess what that $847 charge was for.

Most restaurant owners leave money on the table not because they don’t have deductions but because they didn’t track them properly. A few hundred dollars in missed deductions every month adds up to thousands by year end. That’s real money you’re giving away.