Employee Meal Deductions Under IRC Section 274: What’s Changing in 2026

The rules governing the deductibility of business and employee meal expenses are set to change again in 2026. Recent legislative updates to Internal Revenue Code (IRC) Section 274 will significantly limit what employers can deduct, especially when it comes to meals provided on-site or for the convenience of the employer. These changes may impact company budgets, tax planning strategies, and internal policies related to client meetings, travel, and employee events.

Our Tax Practice has analyzed the changes and outlined the important details. 

Most employer-provided meals will no longer be deductible

Starting in 2026, meals provided for the convenience of the employer, such as those offered on company premises, in cafeterias, or during late shifts and emergencies, will no longer be deductible. This marks a shift from prior years when these expenses were at least partially deductible. Businesses that regularly provide meals to ensure employee availability or support demanding work schedules should revisit these arrangements now to avoid surprises later.

Business meals remain 50% deductible

The long-standing 50% limitation on certain business meals remains in effect. Employers may still deduct half the cost of:

• Meals with clients, customers, or business associates, provided the expense is reasonable and not part of an entertainment activity (unless separately stated and appropriately documented).
• Meals incurred by employees traveling away from home for business purposes, as long as all substantiation requirements are met.

Proper documentation remains critical, business purpose, attendees, and expense details must all be clearly recorded to support these deductions.

Fully deductible meals: Key exceptions

While many deductions are disappearing, some meals remain 100% deductible under specific circumstances. These include:

• Meals treated as compensation: If the cost is included in an employee’s taxable wages.
• Employee recreational or social events: Meals provided at company parties, picnics, or similar gatherings primarily for the benefit of employees.
• Meals made available to the public: Such as promotional or goodwill events.
• Meals sold to customers: Applicable to restaurants and similar businesses.
• Certain specialized cases: Meals for crew members on commercial vessels, oil rigs, or fishing platforms remain fully deductible.

These exceptions reinforce the importance of categorizing and tracking meal expenses accurately.

Nondeductible meals: What no longer qualifies

Certain types of meals will be no longer be deductible in 2026, including:

• Meals deemed lavish or extravagant under the circumstances.
• Meals provided to business associates where no employee is present.
• Meals associated with entertainment activities that are not separately identified or invoiced.
• On-premises meals provided for the convenience of the employer but not treated as employee compensation.

For many organizations, this will mean rethinking long-standing practices such as providing free meals to staff or maintaining on-site dining facilities.

Documentation remains critical

Even when meals qualify for a partial or full deduction, substantiation rules remain strict. Businesses must maintain accurate and thorough records, including:

• The amount of the expense,
• The time and place of the meal,
• The business purpose, and
• The business relationship of participants.

Without adequate documentation, deductions may be denied upon audit.

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.