Restaurant Equipment Tax Deductions: Section 179 Guide
Section 179 and bonus depreciation let restaurants deduct equipment costs immediately instead of over years. Here's what qualifies and how to maximize your write-off.
Restaurant Equipment Tax Deductions: Section 179 Guide
Restaurant equipment tax deductions through Section 179 and bonus depreciation allow you to write off the full cost of qualifying equipment in the year you buy it — rather than depreciating it over 5–7 years. That can mean a $15,000+ tax deduction from a single equipment purchase. Here's what qualifies and how to maximize your write-off.
What Is Section 179?
Section 179 of the U.S. tax code allows businesses to immediately deduct the full purchase price of qualifying equipment and software in the year it's placed in service — instead of depreciating it over time.
For 2024, the Section 179 deduction limit is $1,160,000 (adjusted annually for inflation). The phase-out begins when total equipment purchases exceed $2,890,000 — not a concern for most independent restaurants.
Key requirement: The equipment must be placed in service (actually used) during the tax year you're claiming the deduction.
What Restaurant Equipment Qualifies?
Nearly all tangible personal property used in your business qualifies:
Kitchen Equipment
- Commercial ovens, ranges, fryers, griddles, and broilers
- Walk-in coolers and freezers
- Reach-in refrigerators and lowboys
- Commercial dishwashers
- Ice machines
- Slicers, mixers, and food processors
- Exhaust hood systems
Front-of-House Equipment
- POS systems (hardware and software)
- Credit card terminals
- Display screens and digital menu boards
Other Qualifying Property
- Computer equipment and business software
- Furniture — qualifies as "qualified improvement property" in some cases
- Vehicles used exclusively for business (subject to limits)
What Does NOT Qualify
- Real property (the building itself)
- Land improvements (parking lots, landscaping)
- Property purchased for resale
Section 179 vs. Bonus Depreciation
| Section 179 | Bonus Depreciation | |
|---|---|---|
| 2024 deduction rate | 100% | 60% |
| Can create a loss? | No | Yes |
| Applies to used equipment? | Yes | Yes (after 2017 TCJA) |
| Phase-out threshold | $2,890,000 | No phase-out |
Key distinction: Section 179 cannot exceed your business's taxable income. Bonus depreciation has no such restriction — it can push taxable income negative and create a net operating loss to carry forward.
Strategic use: Claim Section 179 up to your taxable income, then use bonus depreciation for anything that would create a loss.
Bonus Depreciation Phase-Out Schedule
The 100% bonus depreciation from 2018–2022 is phasing down:
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027+: 0% (unless Congress extends it)
The window to take significant bonus depreciation is narrowing. If you're planning major equipment purchases, doing them sooner maximizes your deduction.
Real-World Examples
Example 1 — New Oven and Refrigerator You buy a commercial convection oven ($8,500) and a reach-in refrigerator ($5,200) in 2024. Total: $13,700. Using Section 179, you deduct the full $13,700 in 2024. At a 25% effective tax rate: $3,425 in tax savings vs. ~$490/year if depreciated over 7 years.
Example 2 — Full Kitchen Renovation You purchase $85,000 in equipment. Taxable income is $60,000.
- Claim $60,000 under Section 179 (limited to taxable income)
- Remaining $25,000 under 60% bonus depreciation: deduct $15,000
- Remaining $10,000 depreciated normally
Total first-year deduction: $75,000 instead of the normal ~$12,143/year.
How to Claim Equipment Deductions
- Keep all purchase documentation — invoices, financing agreements, delivery receipts
- Document when equipment was placed in service (date first used matters, not purchase date)
- File Form 4562 — your accountant handles this
- Do year-end tax planning with your CPA before major purchases to time them optimally
Frequently Asked Questions
Can I deduct used restaurant equipment?
Yes. The Tax Cuts and Jobs Act of 2017 extended bonus depreciation to used equipment ("new to you"). Section 179 has always applied to used equipment.
Does leased equipment qualify for Section 179?
Generally, no. Equipment you lease doesn't qualify — you're not the owner. Lease-to-own agreements where you take title at the end may qualify. Have your accountant review specific lease terms.
What if I finance the equipment purchase?
Section 179 and bonus depreciation apply to the full purchase price, not just the amount paid down. Finance $40,000 of equipment with $5,000 down and you can still deduct the full $40,000 in year one.
Can restaurant improvements qualify?
Qualified Improvement Property (QIP) — interior improvements to a nonresidential building — qualifies for 15-year depreciation and currently qualifies for bonus depreciation. Includes interior renovations, new flooring, and ceiling work (but not expansion or structural changes).
Do I have to use Section 179?
No. You can choose Section 179 equipment-by-equipment. If you expect higher income in future years and want to spread deductions over time, you can use normal depreciation instead.
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