2026 Business Meals & Entertainment Deductions

New rules took effect January 1, 2026 that tightened what qualifies as a deductible business meal or entertainment expense. These changes stem from recent federal tax legislation (often referred to as the One Big Beautiful Bill Act), which updated Internal Revenue Code Section 274 to eliminate many longstanding deductions for meals provided for the “convenience of the employer” and other workplace-provided food and drink expenses.

These changes also reflect broader policy priorities — simplifying deduction rules, narrowing what counts as a legitimate business expense, and aligning tax benefits with traditional business development activities (e.g., client meetings or travel meals) rather than internal employee perks. Employers should plan now to understand what remains deductible and how to document expenses to stay compliant.

2026 Deduction Rules — At a Glance:

🚫 0% Deductible (Not Deductible in 2026)

In 2026, the following cannot be deducted — even if business is discussed:

• Entertainment expenses (sporting events, concerts, golf outings, theater tickets, bars, nightclubs)

  Entertainment has been nondeductible since the passage of the TCJA in 2017.

  
  

• Employer-provided meals on premises

  Meals and snacks provided at the workplace for convenience — including cafeteria meals, catered meeting food, break-room coffee and snacks — are no longer deductible.

  
  

• Meals for convenience of the employer

  Meals furnished on business premises to employees to keep them on site (e.g., late-night meals, busy-season lunches) are now 0% deductible.

  
  

• De minimis fringe meals

  Coffee, beverages, snacks, and similar small-value items provided to employees that were previously treated as de minimis benefits are now nondeductible.

⚖️ 50% Deductible

These ordinary business meal expenses remain 50% deductible (standard IRS rule):

• Business meals with clients, customers, or prospects

  Must be ordinary and necessary, not lavish, and you (or an employee) must be present.

  
  

• Travel meals

  Meals consumed while traveling overnight on business can still qualify at 50%.

  
  

Note: Informal coffee meetups or meals without a clear business purpose may not qualify — documentation of business intent is crucial.

✅ 100% Deductible

These remain fully deductible (provided other IRS rules are met):

• Company-wide employee events

  Holiday parties, annual picnics, and team celebrations primarily for employee morale are still 100% deductible since these are treated as employee entertainment primarily for employee benefit.

Why These Changes Matter?

• Elimination of employer convenience meal deductions — The IRS and Congress have explicitly removed deductions for meals provided on-site for employee convenience, affecting workplace perks like cafeterias or staffed snack stations.

  
  
• Refocus on core business activity deductions — Deductibility now tilts more toward “external” business development expenses (clients, travel) rather than internal benefits

• Documentation and accounting changes — Businesses should update policies, budgets, and reporting practices to reflect these 2026 rules.  Vela Advisory will adjust the Chart of Accounts and bookkeeping to reflect these new changes.