Connections for Success

 

04.27.15

Depreciating Your Restaurant Assets

Are you maximizing your depreciation expense? Restaurant owners currently have the luxury of bonus depreciation and higher Section 179 deductions and limits. However, these deductions have expired and been extended over the past few years. Because, there is no guarantee that they will continue to be extended, make sure that you are taking advantage of them.

You can maximize your depreciation deduction by assigning the smallest allowable depreciable life to your restaurant assets. The following asset categories are usually depreciated over a 39-year life, with the exception of furniture, which is depreciated over a seven-year life. However, these assets can be depreciated over smaller lives if they belong to certain categories:

  • Concrete Foundations
    Foundations for signs, light poles, canopies and other land improvements (except buildings) can be depreciated over 15 years.
  • Doors
    Special lightweight double action doors installed to prevent accidents in a heavily trafficked area can be depreciated over five years.
  • Electrical
    Special electrical connections used directly with a specific item of machinery or equipment can be depreciated over five years.
  • Light Fixtures
    Decorative light fixtures which are not necessary for the operation of the building can be depreciated over five years.
  • Furniture
    Furniture unique to restaurants and distinguishable from office furniture (e.g. high stool in a bar, dining room tables and chairs, booths, lockers or benches) can be depreciated over five years.

For new construction or build-outs, consider the tax benefit of a cost segregation study. This study allows an asset that is typically depreciated over 39 years to be depreciated over lesser lives (e.g., five or seven years).

If you have any questions regarding depreciating your restaurant’s assets, including other items that are not mentioned in this blog, please contact Darwin Mintu at 312.670.7444. Visit orba.com to learn more about our Restaurant Group.

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