Is My Nutrition Label Tax-Deductible?
Well hey there food manufacturer, or new food creator, or however you identify yourself in this business. If you’ve been at this game for a while, chances are you’ve made quite the investment in your business. You’ve purchased the packaging, you’ve bought the bulk ingredients — that’s a lot of cost right there. Enter the nutrition label. While this is an essential part of what makes your food product ready for retail, this can also be quite an expense, especially if you’re getting your recipe analyzed by a nutritionist and they are creating your label for you. We know, that’s what we do! But it’s an essential part of what makes you FDA-Compliant for retail that requires nutrition analysis reporting unique to your product, so it’s definitely worth the investment. That being said, expenses like this that contribute to your business’ ability to make a profit happen to be tax deductible. So does that make your nutrition label tax-deductible? Why yes, yes it does. And you’ll be happy to know that there are some other things outside of your nutrition panel that qualify as a tax write off as well.
When you start a new food business and you begin the “start up process”, the costs associated with that are quite literally called start-up costs. And the first $5,000 in start-up costs are tax-deductible according to the IRS. For a new food manufacturer or a new food creator, this can range from anything that helps you produce and distribute your product. Wrapped within these start-up costs are two types of costs that are approved by the IRS to qualify for tax deduction: fixed costs and variable costs. We’ll go over both and discuss how this directly applies to you as a food manufacturer.
Fixed costs refer to costs you incur that are a regular part of running your business. From the office you pay rent to work in to the people that you pay to work for you (if that’s the case).These business costs can extend to your home office and even research and development to create your product correctly. Fixed costs include but are not limited to the following:
- Rent (office, home office, co-working space)
- Legal/Professional Services
- Loan Payments
- Insurance Payments
- Marketing Costs
- Office Supplies
In the case of your nutrition labels being tax-deductible, they actually fall into a few categories under the “fixed costs” umbrella. Nutrition panels are considered a professional expense when taken care of by a nutrition consultant, dietitian and/or other certified or licensed nutrition professional. Other expenses that fall under this category are lawyers and accountants.
In the case that you are utilizing our DIY software and are maintaining a line of products, your nutrition labels can also fall under a software expense.
Variable (One-Time Costs)
When starting a new food business, the amount of money it takes to start your business can far surpass your profit in the first few months. This is where a lot of our new food-preneurs get caught up on the cost of creating a label. Beginning a serious food business takes a lot of work and a big investment. But you know as well as we do, it takes money to make money. Might as well spend it on the things that will bring you forward and into retail, right?
While a nutrition label can fall under a professional or software expense under fixed costs, it call also fall under a variable cost if you do not have several products needing updating on a regular basis. Other variable or one-time costs also include things like:
- Logo design
- Website design
- Brochures & Business cards
- Down-payment on a rental property
- Improvements of workspace
As long as your start-up costs and organizational costs are below $50K, the IRS will allow you to deduct $5,000 in start-up and $5,000 in organizational costs. (Organizational costs being setting up your business as a partnership or a corporation before the end of your first year in business. The expenses associated are legal fees, state organization fees, salaries, filing and accounting fees).
So, if you didn’t know, now you know! Allow our nutritionists and certified FDA experts complete your analysis and nutrition label creation for you, and you get to enjoy a tax write off this year!