2026 Employee Meal Deduction Rules: What Employers Need to Know

Beginning January 1, 2026, most employer-provided meals will no longer be deductible for federal income tax purposes under IRC Section 274, unless the cost is treated as employee compensation or meets a specific exception.

Are employer-provided meals deductible in 2026?

No, most are not. Meals provided for the convenience of the employer (such as meals during overtime, on-site dining, or short breaks) become 100% nondeductible beginning in 2026. This includes meals served at employer-operated cafeterias or dining rooms.

Which meals are still 50% deductible?

Under IRC Section 274(n), employers may continue to deduct 50% of the cost of:

• Meals with clients, customers, or business associates, if the meal is not lavish or part of an entertainment event.
• Meals for employees traveling away from home on business, with proper documentation.

Which meals remain 100% deductible in 2026?

Some meals retain full deductibility:

• Meals treated as compensation: If included in employees’ taxable wages.
• Employee social events: Such as holiday parties or company picnics.
• Meals for the public: Promotional or goodwill events open to the public.
• Meals sold to customers: Applies to restaurants and catering businesses.
• Meals for certain crews: Including maritime and oil/gas workers, under specific rules.

Which meals are no longer deductible at all?

The following meal expenses are not deductible in 2026:

• Meals provided for employer convenience and not taxed to the employee.
• Meals at or during entertainment activities (if not separately invoiced).
• Lavish or extravagant meals.
• Meals with business associates when no employee is present.

What documentation is required to deduct meals?

To qualify for any deduction under IRC Section 274(d), employers must document:

• The amount spent,
• The date and location,
• The business purpose, and
• The participants or business relationship.
• Missing or incomplete documentation can result in denied deductions.

Quick Reference: 2026 Meal Deductibility Chart

FAQs

Q: Are business meals still 50% deductible in 2026?
Yes. Meals with clients or customers that meet substantiation requirements remain 50% deductible.

Q: What happens to on-site cafeteria meals?
They become fully nondeductible unless treated as employee compensation.

Q: What’s the best way to prepare for 2026?
Review current meal policies, track meal types separately, and determine whether taxing certain meals as compensation could preserve deductions.

Q: Why are these changes happening for 2026?
The Tax Cuts and Jobs Act of 2017 (TCJA) began phasing out deductions for employer-provided meals. Under the TCJA, expenses for on-premises meals that were once fully deductible became 50% deductible through 2025, with a complete disallowance scheduled for tax years beginning in 2026. The upcoming change represents the final step in that phaseout.

Next steps for business owners and finance teams

Businesses should review internal meal policies, adjust employee compensation reporting where appropriate, and strengthen documentation practices now, before the new rules take effect.

Our tax professionals are available to help you evaluate your current practices, model the potential tax impact, and implement cost-effective strategies to remain compliant under the updated regulations. Fill out the form on this page to connect with the leaders of our Tax Practice.