23 Jul 2025 Enhanced Food Donation Deduction
Authored by Scott Jensen
Have you ever wondered if it’s worth making a little extra food, just in case a rush shows up?
Most restaurant owners have been there, trying to strike that balance between having enough and not wasting too much. But what happens when the crowd doesn’t come and you’re left with trays of good food at the end of the night?
What a lot of restaurant owners don’t realize is that donating that extra food can actually be a smart tax move. There’s a provision in the tax code that allows for something called an enhanced food donation deduction. This deduction can be worth more than what it cost you to make the food.
It’s straightforward, beneficial, and a way to turn a quiet night into something positive for both your business and your community.
What Food Qualifies?
The IRS allows businesses, including restaurants, to claim an enhanced deduction when they donate “apparently wholesome” food. Apparently, wholesome food is defined by the IRS to include food that meets all federal, state and local quality and labeling laws and regulations, even if the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus or other conditions. This definition means the “pull date”, “sell-by date”, or damaged packaging are all irrelevant in determining the food’s market value when calculating the deduction.
The donated food doesn’t need to be packaged or perfect. It just needs to be safe to eat.
Who Qualifies for the Deduction?
Most restaurants can qualify. If you’re donating food to a local food bank, shelter, or similar nonprofit that’s classified as a 501(c)(3) that helps feed the ill, needy or infants then you’re on the right track.
How is the Deduction Calculated?
Typically, if food isn’t donated and instead ends up in the trash, a restaurant can only write off the cost incurred to produce or purchase that food. With the enhanced food donation deduction, the tax benefit goes beyond just recouping your costs. As you’ll see in the calculation below, the deduction can actually exceed the cost of the food, giving you a greater financial return for choosing to donate rather than discard.
In the calculation, you deduct the lesser of the following:
- Twice the basis value of the donated food
- The basis value of the food plus one-half of the food’s expected profit margin if it were sold at menu prices.
- Donate the food to a qualified charity like a food bank or community kitchen.
- Get a simple receipt or confirmation from the non-profit showing what was donated and when.
- Track the retail value and your cost of the food at the time of the donation.
- Give that info to your CPA at tax time.
- Keep a simple log if you donate food daily.
- You don’t have to track inventory to claim this deduction (which is a huge plus for restaurants).
- The deduction can’t exceed 15% of the restaurant’s net income. For a pass-through entities the deduction can’t exceed 15% of the owner’s adjusted gross income, but for most, that’s not an issue. If it does exceed these limits, the excess will carry forward until it can be used for up to five years.
- You reduce food waste
- You help people in your community
- You save money at tax time
- And it’s easy to build into your end-of-day routine
Example: You run a restaurant and make an extra batch of bread.
Cost to make an additional batch of bread: $30
Menu price if sold: $100
Profit margin: $70
Calculation Options:
Basis value x 2 = $30 x 2 = $60
Basis value + (expected profit margin/2) = $30 + ($70/2) = $65
The enhanced deduction would be the lesser of the two or $60.
If you don’t keep inventory on your books, which is common for restaurants, there is an option of using 25% of the menu price as the food’s basis value when using the above calculation.
How to Claim the Deduction
It doesn’t have to be complicated. Here’s what to do:
If the total value donated in a year is over $500, your tax return will include the Form 8283. This will be handled by your CPA and you won’t need to deal with that paperwork directly.
Things to Keep in Mind
Why It’s Worth It?
There’s a lot to like about this:
Final Thought
Is it worth making a little extra food, just in case? If you have a plan for what to do with the leftovers, the answer could be yes. By donating surplus food, you’re not only prepared for a rush that may or may not come, you’re also making a smart move that benefits your bottom line and your community. That’s the kind of balance every restaurant owner hopes to strike.
If you have questions or want to run through what this could look like for your restaurant, reach out. We’re happy to help you take advantage of a rule that far too many restaurant owners miss.
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