June 11, 2025 - As a restaurant owner, you may be aware of the importance of giving back to the community. One way you can do this, while benefiting your business, is by donating food to charitable organizations that provide care for those requiring medical assistance, the impoverished, or infants. Fortunately, the U.S. tax code offers several benefits for food donations, making it easier than ever for businesses to support local causes while receiving valuable tax deductions.

For restaurants, one important detail to note is that while you cannot deduct the value of services donated (like the time spent organizing an event or volunteering), you can deduct food donations if the food is deemed “apparently wholesome.” But what does that mean? Read on to learn more.

Charitable Contributions of Food: Key Tax Benefits for Restaurants

Under section 170(e)(3)(C), donations of food are given special treatment. Restaurants and other businesses, regardless of their entity type, are eligible for a tax deduction when they contribute food inventory to a qualified charity. Here’s what you need to know about the rules:

• Apparently Wholesome Food: This refers to food that meets all federal, state, and local quality and labeling standards, even if the food is beyond its “sell by date” or does not meet the operator or seller’s internal standards on account of appearance, age, or texture. The key is that the food must be fit for consumption and not spoiled or unsafe.
• Fair Market Value (FMV): The FMV of donated food is calculated based on the price at which you sell similar food items at the time of donation. A taxpayer can claim a charitable deduction equal to the lower of:

• The basis of the contributed food property plus one-half of the ordinary income that would have been recognized if the property were sold for FMV on the contribution date; or
• Twice the tax basis of the property.

• A taxpayer may elect to treat the tax basis of food as equal to 25% of its FMV.

To illustrate, a café donates 100 dozen bagels to the local soup kitchen, which it distributes as part of its mission to care for the disadvantaged. The café normally sells the bagels for ten dollars a dozen, so the bagels are valued at $1,000 for purposes of determining the charitable deduction allowable under Code Sec. 170(e)(3)(C). The café elects to treat the basis of the bagels as being equal to 25% of FMV, or $250. Thus, the café is allowed a charitable deduction equal to twice the deemed basis of the property, or $500, as this is less than the basis plus half the ordinary income that would be recognized on sale of the bagels for their FMV, or $625 ($250 + (($1,000 − $250)/2))

Practicality for Restaurants

Restaurants don’t often sell anything “unprepared” so donating something that’s not on the menu makes it difficult to maximize a deduction based on the contributed food’s FMV. It would be ideal to have certain menu items in mind that can be prepared quickly and efficiently to maximize this deduction. As an example, if the restaurant does not use lettuce that’s more than two days old, at the end of the second day, the kitchen can prepare and box salads comparable to those on the restaurant’s menu to take to a local shelter.

Special Considerations

• The recipient organization must be a 501(c)(3) organization and must provide care for those requiring medical assistance, the impoverished, or infants. The organization must use the donated food in a manner consistent with the organization’s exempt purpose and cannot sell or transfer the donated food for money.
• No Deduction for Services: While you may be able to donate food, remember that services (like staff time) cannot be deducted. Only the value of the food itself can be counted.
• Donation Limits: The tax code does impose limits on how much you can deduct. For most businesses, the limit is 15% of the taxpayer’s net income from the trade or business from which the donation came. Any contributions above this limit can be carried forward for up to five years.
• The business must receive a written statement from the organization stating that the use and disposition of the donated items will be in accordance with the requirements in the preceding bullet point.

In Conclusion

For restaurant owners, donating food to local charities can be both a generous way to support your community and a financially beneficial practice for your business. By taking advantage of the charitable contribution deduction for food donations, you can reduce waste, help those in need, and enjoy tax savings. Be sure to keep good records, understand the rules regarding fair market value, and consult with your accountant to ensure you’re making the most of this opportunity.

If you haven’t yet started donating excess food inventory, now might be the perfect time to implement a charitable giving program in your restaurant!

Citrin Cooperman’s Restaurants and Hospitality Industry Practice is skilled in helping clients assess options to drive growth and achieve their strategic goals. For more information, please contact Bob Gilbert or info@citrincooperman.com.