Limits to Employer Deductions for Certain Meals in 2026 by Richard E. Cabrera, JD, CPA
Businesses generally lose two valuable tax deductions for the costs of meals they provide to their employees after Dec. 31, 2025. This includes the costs of most meals provided at an employer’s convenience and meals provided at company-operated dining facilities, unless a specific exception applies.
Background
The Tax Cuts and Jobs Act (TCJA) of 2017 changed how businesses treat costs incurred by them and their employees for food and beverage services. For example, while the law eliminated deductions for most entertainment, recreation and amusement activities, it allowed businesses to deduct 50 percent of their separate food and beverage costs when they met specific criteria. In addition, the law allowed employers to annually deduct 50 percent of the costs for food and beverages they provide to employees, at the employer’s convenience and on the company’s premises, through 2025. Effective Jan. 1, 2026, this deduction is no longer available for most businesses.
Deduction Changes in 2026
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, eliminates deductions for expenses related to:
- Food and beverages employers provide to employees and business associates onsite at company cafeterias and break rooms (regardless of whether an employer or a third-party operates those facilities), and
- Employee meals employers bring into the office at their convenience, including working lunches or dinners for employees working late.
By contrast, the following expenses may be eligible for a full, 100 percent deduction when employers meet specific rules.
- Food and beverages treated as employee compensation or includable as income for non-W-2 employees
- Food, beverages and facilities made available to employees at recreational/social events, including company picnics or holiday parties, for the benefit of the employees (subject to highly compensated employee nondiscrimination requirements)
- Food and beverages provided to the general public as a part of a promotion, tradeshow or community goodwill
- Food and beverages sold by the taxpayer in a bona fide transaction
- Food or beverages provided to crew members on commercial fishing vessels or facilities for the processing of fish for commercial use
- Food and beverages that are part of what the taxpayer sells (i.e., restaurant meals and catering services)
A 50 percent deduction may be available for the following expenses:
- Meals with clients where an employee or representative of the business is present
- Meals employees enjoy while traveling for business purposes
- Food and beverages purchased and invoiced separately from entertainment activities, such as sporting events, theater tickets, and golf, tennis, fishing or hunting outings (expenses for entertainment remain non-deductible)
Planning Tips
Taxpayers affected by the new rules regarding deductions for employer meals should take the time to understand how these changes affect them and how they may plan to minimize any adverse tax consequences. This may involve reviewing contracts and pricing with current food/ snack vendors, evaluating current business meal practices, updating meal expense and reimbursement documentation policies, and educating employees on these changes.
While the loss of a tax deduction is not a good reason to eliminate an employee perk, it does require employers to conduct a deep dive into their existing practices and make small changes as needed. For example, employers should assess how the loss of a deduction may increase their overall tax expenses, how they may budget for such a change, and whether it makes sense to change existing meal practices by limiting the number of meals provided to employees or taxing certain meals as taxable employee compensation that employers may fully deduct. Working with experienced tax advisors can help companies make that determination and determine the best ways to maximize any remaining food and beverage deductions.
About the Author: Richard E. Cabrera, JD, CPA, is a principal with Baker Tilly x Berkowitz Pollack Brant’s Tax Consulting and Compliance practice, where he provides tax planning, consulting, and mergers and acquisitions services to businesses and their owners in the U.S. and abroad. He can be reached at the firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or info@bpbcpa.com.
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