Can I deduct food waste as a business expense?
Food waste is deductible, but probably not in the way you’re thinking. Most food waste doesn’t show up as a separate line item on your tax return. It’s already captured through your cost of goods sold calculation.
Here’s how it works. When you buy $15,000 in food inventory during a month and end with $3,000 still on hand, your cost of goods sold is $12,000. That includes everything you actually sold, everything that spoiled, everything that got thrown out during prep, and anything employees ate. The waste is already reducing your taxable income because you’re not adding it back as unsold inventory.
This means accurate inventory counts are what matter for tax purposes. If you overcount ending inventory, you’re understating cost of goods sold and paying taxes on money you didn’t actually keep. Count it correctly and the waste is already baked into your numbers.
Separate deductions come into play in a few specific situations. Disposal costs for hauling away food waste are operating expenses. If you pay for compost pickup or grease trap cleaning, those are deductible as their own line items. Same with pest control costs that arise from managing food storage areas.
Large write-offs from unusual events might need documentation. If a freezer fails and you lose $4,000 in product, that’s still a cost of goods sold issue, but you’ll want records showing what happened and the value lost. Your insurance claim needs this documentation anyway, and the IRS could ask for it during an audit.
Food donations offer a potential benefit beyond the basic cost deduction. If you donate food to a qualified nonprofit instead of throwing it away, you may be able to deduct more than your cost for the food. The rules depend on your business structure and the type of food donated, but it’s worth exploring if you regularly have usable product that goes unsold. Nampa bookkeepers familiar with food businesses can help you track donations properly for the enhanced deduction.
The tracking question is where this gets operationally important. Knowing your waste percentage helps you identify problems even though it doesn’t change your tax situation. If prep waste jumps from 5% to 12%, something changed that’s costing you real money. You can’t fix what you don’t measure.
For restaurants and food service businesses, waste tracking ties directly to profitability. The deduction handles itself through accurate inventory counts. What matters for your bottom line is understanding where waste comes from and whether you can reduce it.
The Treasure Valley's Tax and Accounting Team
The Next Step:
A Short Conversation
Tell us what you're dealing with. We'll listen, answer your questions, and give you a straightforward quote.
More Questions
Should I hire a bookkeeper who understands construction accounting?
Yes. Construction accounting requires job costing, progress billing, retainage tracking, and subcontractor management that generic bookkeepers typically don't handle well. Without industry expertise, your books might balance but won't tell you which jobs actually made money.
Read answerHow do I handle retainage in my construction bookkeeping?
Set up separate accounts for retainage receivable and retainage payable. Track both at the job level so you know exactly what's held back on each project. Record the full invoice amount as revenue when the work is done, even though part of the payment is withheld.
Read answerCan I deduct my work truck as a business expense?
Yes, if you use the truck for business. You can deduct either actual expenses or use the standard mileage rate. For trucks used heavily in construction or trades, the actual expense method with Section 179 depreciation often saves more.
Read answerWhat is the difference between completed contract and percentage of completion accounting?
Completed contract recognizes all revenue when a project finishes. Percentage of completion recognizes revenue as work progresses. The method you use affects when you pay taxes and how your financial statements look to banks and bonding companies.
Read answerHow do subcontractors report income and expenses?
Subcontractors report income and expenses on Schedule C as part of their personal tax return. All income is taxable whether you receive a 1099 or not, and deductible expenses reduce your taxable profit.
Read answerHow do I track equipment depreciation for my contracting business?
Maintain a fixed asset register that lists every piece of equipment, its purchase date, cost, and depreciation method. This schedule feeds directly into your tax return and needs to be updated whenever you buy, sell, or dispose of equipment.
Read answer
