For many businesses, meals and entertainment expenses are a regular part of operations — from client lunches to employee meals. But the rules governing what you can deduct on your federal tax return have changed in recent years and continue to evolve as we move through the 2025 and 2026 tax years. Here’s a clear breakdown of the rules, how they apply, and what’s changed heading into 2026.
What’s Still Deductible in 2025
For the 2025 tax year (returns filed in 2026):
- Business Meals: You can generally deduct 50% of the cost of business meals if:
- The expense is ordinary and necessary,
- You or an employee are present,
- And the meal isn’t considered lavish or extravagant.
- Entertainment Expenses: Entertainment, amusement, or recreation expenses (like tickets to sporting events, golf outings, theater, etc.) are not deductible, unless the cost of the food/beverage during that entertainment is separately stated.
- Meals Provided to Employees: Meals provided at the workplace for the convenience of the employer — like those in a cafeteria or break room — generally were still 50% deductible under current rules for tax year 2025.
Important Change Effective in 2026
Beginning January 1, 2026, a major change impacts employer-provided meals and some related deductions due to a delayed provision of the Tax Cuts and Jobs Act (TCJA) under Internal Revenue Code Section 274(o):
Employer-Provided Meals Generally Become Non-Deductible
For tax years beginning after December 31, 2025 (i.e., most 2026 filings):
- Meals provided for the convenience of the employer — such as:
- On-site cafeteria meals,
- Breakroom snacks and coffee,
- Meals provided during overtime shifts,
- Other food offerings at the workplace —
are now 100% nondeductible.
This represents a significant shift from previous years when these expenses were often partially deductible.
What Remains Deductible in 2026
Even with the new restriction, some meal expenses are still deductible — though often subject to limitations:
Business Meals with Clients
- Meals with clients, customers, or business associates continue to be 50% deductible if the business purpose is documented, the meal is ordinary and necessary, and the meal isn’t lavish or extravagant.
Travel Meals
- Meals while traveling on business (away from your tax home) remain 50% deductible, when properly documented.
Fully Deductible Meals
Certain meals remain 100% deductible, including:
- Meals treated as employee compensation (e.g., included on a W-2),
- Company-wide parties or employee social events open to all employees (holiday parties, picnics),
- Meals available to the general public (e.g., promotional or goodwill events).
Entertainment Still Nondeductible
There’s no change here: expenses related to entertainment, amusement, or recreational activities are generally not deductible, with very limited exceptions.
Examples of nondeductible entertainment include:
- Golf outings and greens fees,
- Tickets to concerts or sports events,
- Nightclubs or social club dues,
- Recreational trips or excursions.
Only the food or beverage portions of an entertainment event — if separately invoiced and not inflated — may qualify for a meal deduction.
Documentation Is Still Critical
To substantiate any meals deduction for either 2025 or 2026:
- Keep itemized receipts showing the date, amount, location, and business purpose.
- Record who attended and their business relationship.
- Ensure the expense isn’t lavish or extravagant under the circumstances.
Without proper records, the IRS may disallow deductions.
Planning Tips for Businesses
- Review your meal policies: What used to be a deductible perk (e.g., free meals or snacks) may no longer provide tax benefits after 2025.
- Ensure proper substantiation: Strong documentation supports deduction eligibility.
- Separate expenses correctly: Separate meal costs from entertainment and other categories in your accounting system to avoid losing deductions.
- Understand exceptions: Some industries (like restaurants) and specific situations may have unique rules or exceptions.
Bottom Line
The meals and entertainment deduction landscape continues to evolve. While business meals with clients generally remain 50% deductible for both 2025 and 2026, the big change starting in 2026 is that many employer-provided meals are no longer deductible at all.
Being proactive now — before year-end 2025 — will help your business make informed decisions, minimize surprises, and ensure compliance when preparing your 2025 and 2026 tax returns.
If you’d like help planning around these changes or optimizing your deductions, contact our team of tax professionals — we’re here to help you make sense of it all.
