Food Truck Tax Deductions: COGS, Commissary Fees, and Operating Expenses

Food truck businesses have a cost structure that separates into two categories: cost of goods sold (COGS) and operating expenses. COGS includes the direct cost of food, beverages, and packaging that go into the products sold to customers. Operating expenses include everything else: truck maintenance, fuel, commissary rent, insurance, permits, labor, and marketing. The distinction matters because COGS is reported in Part III of Schedule C (lines 35-42) and reduces gross income, while operating expenses are reported in Part II (lines 8-27) and reduce net profit.

How should food inventory be tracked for COGS?

The IRS requires businesses that sell products to account for inventory. For current guidance, see IRS Publication 535 (Business Expenses). However, most food truck operators use the cash method of accounting and can treat food inventory as a supplies expense (deducting it when purchased rather than when sold) if average annual gross receipts are $32 million or less (the 2026 threshold under IRC 448(c)). For a food truck doing under $500,000 in revenue, the practical approach is:

1. Track all food and packaging purchases throughout the year
2. Report the total on Schedule C Part III as “Purchases” (line 36)
3. Report beginning and ending inventory if you want to be precise, or report zero inventory and deduct all purchases as incurred

The key is consistency. Pick a method and apply it every year.

What about event fees and location costs?

Many food trucks pay fees to park at events, breweries, office parks, or food truck parks. These location fees (sometimes called “lot fees” or “commission on sales”) are deductible operating expenses. If the fee is a percentage of sales (common at events: 10-20% of gross), it is reported as commissions on Schedule C line 10. If the fee is a flat rate for the parking spot, it is reported as rent on Schedule C line 20b.

Catering revenue (private events, corporate lunches) is reported as regular business income. The food costs for catering jobs are part of COGS. Travel to the catering location is a vehicle expense (mileage or actual cost).

Are there deductions I should take before year-end to reduce my tax bill?

Several deductions require action before December 31 to count for the current tax year. Prepaying January rent qualifies under the 12-month rule if the lease term does not extend beyond the following year. Purchasing equipment triggers Section 179 or bonus depreciation in the year placed in service. Funding a SEP-IRA does not require a year-end contribution (the deadline extends to the filing deadline), but solo 401(k) employee deferrals must be elected by December 31. Review your projected income in November and accelerate deductible expenses into the current year if your marginal rate will be lower next year.

Can I deduct startup costs before my business earns any revenue?

Under IRC 195, you can immediately deduct up to $5,000 of startup costs in the year your business begins operating, with the remainder amortized over 180 months (15 years). The $5,000 immediate deduction phases out dollar-for-dollar once total startup costs exceed $50,000. Startup costs include market research, travel to investigate the business, advertising before opening, employee training before operations begin, and professional fees for setting up the entity. The key requirement is that the business must actually begin operating; costs for a business you investigated but decided not to pursue are generally not deductible. The amortization period starts in the month the business opens its doors to customers, not when you began incurring costs.

Related guides:

• Food truck business structure: LLC, S-Corp election, and the QBI deduction
• Estimated taxes for food truck owners: seasonal income and quarterly payments
• Food truck sales tax, permits, and license deductions: state-by-state compliance
• Retirement plans for food truck owners: Solo 401(k), SIMPLE IRA, and the employee question
• Worker classification for food trucks: prep cooks, window staff, and event helpers

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.