At the start of this year, several tax changes went into effect that impact meal deductions related to businesses. The changes came about because of provisions from the Tax Cuts and Jobs Act and new exceptions from the One Big Beautiful Bill Act. Because of these changes, a lot of meal expenses that businesses used to be able to deduct don’t qualify anymore.
What’s no longer deductible
Starting in 2026, meals provided for the convenience of the employer or considered “de minimis” fringe benefits are no longer deductible. This includes:
- The cost of groceries used to feed workers day to day
- Food that businesses offer on company premises for operational reasons
- Meals or other food businesses provide in breakrooms or through employer-operated kitchens
- Subsidized cafeterias if the business doesn’t tax the meals as employee income
What’s still 50% deductible
Some meal expenses continue to qualify for 50 percent deductions, including:
- Business meals with clients or prospects, as long as an employee is there and the meal isn’t part of an entertainment activity
- Meals that happen during business travel
Proper documentation is required for these deductions. Businesses need to record the purpose of the meal, the location, and the names and roles of those present.
Fully deductible meals
Meals that are still 100 percent deductible include:
- Those provided for annual events, like a harvest celebration meal or branding
- Those that businesses sell to customers as part of regular operations
- Those that businesses include as part of a worker’s taxable compensation
- Those that businesses offer the public for marketing or promotional purposes
- Food at company-wide events, like staff parties or team-building outings
The deductibility depends on how businesses provide, report, and document the meals.
Entertainment expenses still a no-go
Entertainment expenses still aren’t deductible. If a meal is related to an entertainment outing — like a sporting event — itemize any food and drink and document everything to qualify for a deduction. If you bundle the costs, that amount isn’t deductible.
Next steps for businesses
The new meal deduction rules mean businesses should make sure to properly classify and document expenses and have strong internal controls. That will help the business be more efficient and compliant.
Here are some steps to take:
- Update meal and travel reimbursement policies
- Figure out which meal expenses aren’t deductible
- Make sure all expenses have clear documentation
- Train employees who handle submitting and approving expenses
- Review how your business handles employee meals and similar benefits
If you need help deciding what meal deductions are or aren’t allowed, let us know.