Meals & Entertainment Deductibility in 2025 and 2026: What Staffing Firms Need to Know

As staffing firms continue navigating a tightening regulatory landscape, understanding how meals and entertainment expenses will be treated for tax purposes in 2025 and 2026 is essential for budgeting, pricing, and compliance. Significant changes, especially those that took effect January 1, 2026, will impact employer-provided meals, travel meals, client meals, entertainment events, and employee functions.

This article summarizes the key rules and updates most relevant to staffing companies.

Guidance for 2025 tax year

For the 2025 tax year, staffing companies continue to operate under the post‑TCJA framework:

• Business meals with clients and travel meals remain 50% deductible, provided they are properly documented.
• Entertainment expenses remain nondeductible, except where meals are invoiced separately and meet the criteria for deductibility under IRC §274.
• Employer‑provided meals on premises (e.g., meals offered during overtime shifts or in office cafeterias) are still 50% deductible for 2025, but only until December 31, 2025, after which the rules change dramatically.

Updated guidance for 2026

Effective January 1, 2026, new rules under IRC §274(o) take effect, eliminating many longstanding deductions. These changes are particularly important for staffing firms with in‑house operations teams, training programs, or employer‑provided food benefits.

• Employer provided meals become 100% nondeductible.
• Meals provided for the convenience of the employer (e.g., meals to keep recruiters onsite or on deadlines) become 100% nondeductible.
• Meals provided in employer‑operated cafeterias or break rooms also become 100% nondeductible.

This is a sharp shift from 50% deductibility in 2025 and will affect staffing firms that offer meals to employees working long hours, attending orientations, or staffing on‑site recruiting events.

Deductible items for 2026

Despite the 2026 eliminations, several categories remain deductible, and staffing firms should understand and leverage these rules.

• Business meals at 50% deductible
• Client business meals, provided they are not part of an entertainment event unless separately stated remain 50% deductible.
• Travel meals for employees working away from home on business assignments are also 50% deductible.

Proper substantiation remains essential: who attended, business purpose, receipts, and documentation.

Even in 2026, the following remain 100% deductible:

• Meals treated as taxable compensation to employees.
• Employee recreational events (e.g., company parties, appreciation events)
• Meals offered to the general public as part of marketing or goodwill.
• Meals sold to customers, such as those in hospitality businesses.

Although staffing firms may not sell meals, many employee appreciation and recognition events remain fully deductible, something worth integrating into company culture and planning.

Defending your deductions to the IRS

The IRS will expect strict compliance with substantiation rules. Businesses should ensure:

• Digital receipt capture
• Detailed narratives on purpose and attendees
• Clear segregation of meals from entertainment charges

This is especially relevant in staffing, where recruiters frequently engage clients and candidates over meals.

Conclusion

The years 2025 and 2026 bring important changes to meal and entertainment deductions, with the most significant shift happening January 1, 2026, when employer‑provided meals become fully nondeductible. Staffing companies should use 2025 to prepare, adjust budgets, update policies, and ensure strong documentation practices to remain compliant and tax‑efficient. By planning ahead, firms can mitigate surprises and continue to deliver strong financial performance.

If you are unclear how the changes to meals and deductibility will impact your business, fill out the form to have a short discussion with our Staffing Practice.