Winery or brewery owner taxes and deductions

Federal excise tax is a separate obligation from income tax, owed on what you produce rather than what you earn, and it is payable whether or not the business is profitable. Smaller producers get a reduced rate on the first tranche of production, which is worth confirming rather than assuming.

Tanks, fermenters, canning lines and cooperage are Section 179 property. Product in barrel or tank is inventory and is not deductible until sold, which is costly for anything aged across several years. A tasting room is a separate retail business inside the same company, usually with sales tax and its own licensing.

The deductions with a rule attached

These are the lines where the answer is not simply "keep the receipt"each has a cap, a percentage or a test that decides how much of the spend you actually get:

Equipment: Section 179 property. Deduct the whole cost in the year it goes into service rather than spreading it over the asset's life, up to $2,560,000 a year, and 100% bonus depreciation is now permanent. The catch is the business-use test: anything used more than 50% for the business qualifies, and you deduct at that percentage rather than the full price. So anything you also use at home comes off at the share that is genuinely work, not the whole invoice.

The rest of the winery or brewery owner deduction list

Ordinary and necessary business expenses, deductible in full in the year you pay them, provided they are genuinely for the business:

Stock, as cost of goods sold
Federal excise tax
Licensing fees state
Staff wages
Packaging
Utilities
Tasting room costs
Marketing

Worth knowing

Federal excise tax is owed on what you produce, separately from income tax, and a reduced rate applies to smaller producers.

That is what is specific to this trade. The larger deductions are the universal ones, see the full checklist.

What each deduction is worth to you

On $100,000 of profit with no state income tax, $1,000 deducted saves $305, 30.5%, because it comes off self-employment tax and income tax together:

Net profit	Saved per $1,000 deducted	Effective
$40,000	$231	23.1%
$100,000	$305	30.5%
$200,000	$297	29.7%

The last row is worth less than the one above it, and that is not a mistake: past the Social Security wage base the self-employment part of the saving drops from 15.3% to 2.9%, and the higher income-tax bracket does not quite make up the difference. A deduction is worth most in the middle.

Add a state income tax and every row rises. The 1099 calculator applies that layer.

Where this comes from

The rules on this page that are specific rather than general are cited below. Follow a link to read the provision itself rather than taking our word for it:

Excise tax is determined on removal from bonded premises, not on productionIRC 5054(a)medium confidence
Reduced beer rates and wine tax credits by production volumeIRC 5051(a); IRC 5041(b)-(c)medium confidence

What these words mean

Section 179: A rule letting you deduct the whole cost of equipment in the year you start using it, instead of spreading it over the years you own it.
Depreciation: Spreading the cost of something long-lasting, a vehicle, a camera, a tractor, across the years you use it, rather than deducting it all at once.
Excise tax: Used by some states as the name for their tax on business earnings. Despite the name it is not a tax on a particular product here, it is the state’s corporate income tax under another label.

General information about how these deductions work, not tax advice. Whether a particular expense is deductible for you depends on facts this page does not have, check with a tax professional before claiming anything listed here.