2026 IRS Inflation: Restaurant & Franchise Tax Guide

November 3, 2025 |Tax Preparation Services

If you own a restaurant, a multi-unit group, or a franchise network, the IRS’s 2026 inflation adjustments aren’t just numbers on a press release—they shape how you time owner pay, bonuses, pricing, and capex. Below is a practical playbook you can act on now, written for operators who live in the P&L.

At a glance (tax year 2026): the standard deduction rises to $32,200 (MFJ), $16,100 (Single/MFS), and $24,150 (HOH). Bracket thresholds shift up, and several ceilings (EITC, fringe benefits, etc.) adjust with inflation. These amounts apply to returns you’ll file in 2027.

Why this matters to restaurants & franchises

Inflation adjustments quietly change where income lands. Higher 2026 thresholds can:

Reduce the tax bite on profit-sharing and manager bonuses paid in 2026 vs. late 2025.
Influence S-corp payroll calibration for owner-operators.
Reshape the ROI of capex decisions when paired with 100% bonus depreciation and Section 179. (OBBBA restored full bonus for qualified property placed in service after Jan 19, 2025; Section 179 limits were enhanced.)

The big levers you control

1) Owner-pay and bonus timing

With 2026 thresholds higher, consider whether year-end 2025 bonuses should slip into early 2026 (when it won’t harm retention or lender covenants). The aim isn’t to “game” the system; it’s to place discretionary comp where after-tax cash is strongest given your margins and debt schedule. Use run rates, not hunches:

If 2025 profit is already tight, a January bonus (2026 income) could lower current cash stress and benefit from 2026 brackets and the higher standard deduction. IRS
If you need the 2025 deduction (e.g., for lender metrics), keep part of the bonus in December and stage the remainder in Q1.

2) S-corp “reasonable comp” tune-up

Owner-operators should revisit reasonable compensation for 2026. The higher standard deduction doesn’t change your duty to pay a reasonable wage, but it does affect the pay vs. distribution balance you pick for take-home efficiency. Model it alongside payroll taxes, health benefits, and credits you actually use.

3) Price & pay moves that stick in 2026

Menu pricing: If your last price change was pre-summer, pressure-test contribution margins against new labor and COGS realities for 2026. Bracket shifts won’t move demand by themselves; your prime costs will.
Manager pay bands: When you adjust bands in January, pair them with right-sized withholding (new W-4s) so the crew doesn’t get a spring tax surprise. The IRS updates tables annually—build that into onboarding and your HRIS checklist. (Watch for the 2026 tables; for reference, the IRS confirms the 2025 business mileage rate at $0.70/mi—plan budgets now and update when 2026 publishes.)

Capex: 100% bonus is back—use it with intent

OBBBA restored 100% bonus depreciation for qualified property placed in service after Jan 19, 2025, and enhanced Section 179 expensing (with a higher limit/phase-out). For restaurants, that means ovens, refrigeration, line equipment, smallwares systems, back-office hardware, and some tech qualify—if they’re placed in service on time.

How to choose:

100% bonus: front-loads the deduction in the year you place the asset in service—great when profits are strong and you need rate relief.
Section 179: flexible and immediate, but subject to limits and a phase-out; often best for smaller operators or when you want to target specific assets.
Smoothing: if you don’t want a full write-off in your first tax year ending after Jan 19, 2025, OBBB rules include an optional election (e.g., phased write-off) in some cases—run the model before you order.

Operational tip: Stage deliveries before your fiscal year-end cutoffs. A fryer sitting in a warehouse isn’t “placed in service.”

Withholding & payroll hygiene for 2026

Refresh W-4s for anyone with big life changes in 2025 (marriage, dependents, second jobs). The higher 2026 standard deduction changes how “just-enough” withholding feels on payday.
Update the mileage/per diem policy in January. The IRS sets business mileage annually (2025 is $0.70/mi); GSA per diems adjust by fiscal year. Publish a one-pager so district managers submit clean reimbursements that are non-taxable under an accountable plan.
FICA Tip Credit (45B) workpaper: Continue monthly tallies (tips above $7.25/hr cash wage) and exclude service charges (wages, not tips). Tie the credit into year-end tax planning so you don’t leave dollars on the table.

What changes in your estimates & safe harbors

Quarterly estimates: If your 2026 plan shows higher pretax income (new units, price change, stronger comps), increase estimates early; if you’re opening slowly, use safe harbors but monitor Q2/Q3 so you’re not chasing in Q4.
Owners’ personal planning: Higher 2026 standard deduction + wider brackets may reduce under-withholding risk for some—but not for those with large K-1 swings. Build a K-1 preview into your March and June close.

Decision matrix: Should I shift income into 2026?

Ask three questions:

Cash reality: Will delaying a discretionary bonus or draw to January materially improve December cash (payroll, vendors, debt)?
Tax rate reality: Does your 2026 marginal position (with wider brackets and a bigger standard deduction) produce a lower effective rate than 2025?
Credit reality: Are there credits (e.g., 45B tip credit, Work Opportunity Tax Credit) or loss carryforwards that you’ll waste if you under-earn in 2025?

If you can answer yes to #1 and neutral/yes to #2-#3, shifting discretionary income into 2026 often makes sense. Document decisions in your controller’s close notes so your tax preparer sees the logic.

A practical year-end → Q1 checklist (save this)

Re-forecast Q4 + 2026 with inflation-adjusted brackets and new standard deduction; brief owners on after-tax cash impact.
Decide bonus timing (Dec vs. Jan) and communicate early.
Tune S-corp comp for owner-operators (pay vs. distribution model).
Lock the capex calendar against “placed-in-service” dates; confirm eligibility for 100% bonus or §179.
Publish 2026 payroll memo: W-4 refresh, accountable plan rules, tip vs. service charge refresher, and month-end cutoffs.
Update estimates for 2026; set calendar reminders for a K-1 “preview” checkpoint.
Train managers on documentation (tips, reimbursements, approvals) so credits and deductions survive an audit.

FAQs we’re hearing from operators

Q: Do the 2026 changes affect my 2025 return?

A: No. 2026 adjustments apply to tax year 2026 (returns filed in 2027). 2025 has its own amounts (e.g., MFJ standard deduction of $31,500 under OBBB). If you’re finalizing 2025 moves, use the 2025 values in your calculations.

Q: Should I rush equipment before December 31?

A: Not blindly. Thanks to OBBB, 100% bonus applies to qualified property placed in service after Jan 19, 2025—so a well-timed Q1 2026 install can still deliver the full write-off. Model cash, lead times, and lender ratios first.

Q: Will the mileage rate change for 2026?

A: The IRS sets it annually. 2025 is $0.70/mi; plan to update your policy when the 2026 rate posts.

Why operators call QMK before January

QMK Consulting is an accounting firm in New York City specializing in franchise accounting and restaurant accounting (serving clients nationwide). We turn compliance into better cash: owner-pay models that fit the year’s brackets, bonus timing that keeps teams motivated, and capex plans that use 100% bonus depreciation without breaking your covenants. Then we operationalize the numbers—menu mix, prime cost, labor cadence—so the tax plan supports the business, not the other way around.

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Want a quick, numbers-first review of how the 2026 IRS inflation adjustments intersect with your bonus plan, owner compensation, and capex calendar? Book your free profit & cash flow analysis by our experts—and leave with a simple, prioritized action plan for Q1.

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