Meals and entertainment deductions: What's deductible under current IRS rules

Recent tax law updates

The rules around means and entertainment deductions have changed several times in recent years. Staying current matters for compliance and for making sure you don’t leave any valuable tax deductions on the table.

 

Here are a few recent changes to be aware of.

 

Changes in deduction percentages

With the Tax Cut and Jobs Act, business meals with clients and office snacks and meals are now slated to be 50% tax-deductible. Some of these items were previously 100% deductible, spurring businesses to make changes in accounting and payroll.

 

Specifically, businesses can now deduct half of the cost of business-related meals if and only if an employee was present “and the food or beverages were not considered lavish or extravagant.” In addition, food and beverages must be purchased separately from entertainment if you offer them during the course of an entertainment activity.

 

Beginning in 2026, meals provided to employees for the convenience of the employer are generally no longer deductible unless a limited exception applies. This typically includes meals provided on an employer’s premises for business reasons, such as short meal periods, emergency availability, or remote work locations.

 

In addition, expenses related to employer-operated eating facilities — think on-site cafeterias or dining rooms — are also generally nondeductible starting in 2026, even if these meals were previously deductible under earlier rules.

 

Consolidated Appropriations Act changes

The pandemic temporarily expanded meal deductions when the Consolidated Appropriations Act of 2020 allowed a 100% deduction for food and beverages purchased from a restaurant in 2021 and 2022. That provision expired at the end of 2022, and meals reverted to the 50% limit under TCJA rules for 2023 through 2025.

 

Employer-provided meals and de minimis fringe benefits

Starting in 2026, two categories of employer-provided meals that were previously 50% deductible are now fully nondeductible under the OBBBA:

• Meals provided for the convenience of the employer. This includes onsite lunches during staff meetings, overtime meals, and similar expenses where the employer’s operational needs drove the meal. However, there are a few exceptions. Meals provided on certain commercial fishing vessels, fish processing centers, and drilling rigs are still 100% deductible. And restaurants can still deduct meals provided to employees as part of normal business operations.
• De minimis fringe benefit meals. Break room coffee, pantry snacks, and similar small food perks that qualified as excludable de minimis fringe benefits also lost their deductibility. Employees still aren’t taxed on these benefits, but the employer can no longer deduct the cost.

 

Expenses related to operating an employer-run eating facility, such as an onsite cafeteria, are also generally nondeductible.

Understanding deduction percentages

The tax code doesn’t treat all business meals the same. Depending on the nature of the expense, meals can be 100%, 80%, or 50% deductible, or not deductible at all.

 

Here’s how the categories break down.

 

100% deductible meal expenses

A few food and beverage expenses are still 100% deductible. These meal expenses include:

• Company holiday parties and similar social events hosted for all employees
• Food or beverages provided to the general public at no charge
• Meals treated as part of an employee’s taxable compensation
• Meals provided on certain commercial fishing vessels, at fish processing facilities, and on drilling rigs

 

50% deductible meal expenses

Most business meals fall into the 50% deductible category. These include:

• Client meals where you discuss business, as long as the expense isn’t lavish or extravagant and an employee is present
• Meals consumed while an employee is traveling for business
• Meals at conferences and business meetings
• Food purchased for a board meeting

 

Meals provided to clients or other business associates where no employee or owner is present, such as meal gift cards, generally aren’t deductible.

 

80% deductible meal expenses

This category applies specifically to workers subject to U.S. Department of Transportation (DOT) hours-of-service limits. Qualifying workers include:

• Interstate truck and bus drivers under DOT regulations
• Air transportation employees subject to Federal Aviation Administration (FAA) regulations
• Railroad employees subject to Federal Railroad Administration regulations
• Merchant mariners subject to Coast Guard regulations

 

With all of these categories in play, accurate payroll software is a must for organizations to track such expenses.

Recordkeeping requirements

The IRS requires businesses to maintain records of deductible meal expenses and keep receipts or written documentation for any expense totaling $75 or more. For every deductible meal, your records should capture:

• The date, time, and location of the meal
• The names and business relationships of everyone present
• The business purpose of the expense
• The total cost, including tax and tip

 

Keeping receipts, canceled checks, and bills organized by expense type and documenting the business purpose at the time of the meal rather than reconstructing it later makes substantiating deductions much easier if the IRS ever audits your tax return.

 

Setting up a standardized expense form and clear employee guidelines helps your organization consistently track and maintain records. To help you get started, the table below shows categories of meal and entertainment expenses, along with examples of each.

Entertainment expenses: What’s deductible?

The tax code treats entertainment expenses differently from meals. Since the TCJA took effect in 2018, most entertainment expenses are entirely nondeductible, including sports tickets, concerts, golf outings, and similar client activities, regardless of whether you discussed business during the event.

 

That includes situations where you’re not present. For example, if you send clients tickets to a sporting event and don’t attend yourself, the cost of those tickets is also not deductible.

 

What about food and drinks at an entertainment event?

Sometimes it’s tough to draw the line between meals and entertainment. There are easy cases. For example, say you take a client to a baseball game. The tickets aren’t deductible, but the hot dogs and sodas you buy at the game may still qualify for a 50% business meals deduction as long as you purchase the food and beverages separately from the tickets or they’re separately itemized on the bill.

 

On the other hand, say you sponsor a client’s spot in a golf tournament that includes a lunch buffet, snacks, and an open bar. They’re all bundled into a single entry fee. Because the invoice doesn’t separately state the food and beverage costs, the IRS treats the entire amount as a nondeductible entertainment expense.

 

The safest move is to request itemized billing up front whenever food is part of an entertainment event.