Businesses that provide meals and food-related benefits to employees should prepare for an important tax change effective December 31, 2025. Understanding these changes can help employers plan and effectively document meal expenses for the period the new rules take effect.
Employer Meal Expenses That Will No Longer Be Deductible
For expenses incurred or paid after December 31, 2025, employers will generally not be allowed to claim a tax deduction for the following costs:
1. Meals Furnished on Business Premises for the Employer’s Convenience
Expenses for meals furnished on the employer’s business premises for the employer’s convenience will become nondeductible if those meals are excluded from the employee’s gross income.
Examples may include meals provided to employees who must remain on-site during work hours due to business needs, are working overtime, or for working lunch meetings.
2. Employer-Operated Eating Facilities
No deduction will be allowed for expenses related to the operation of an employer-operated eating facility when the value of the meals provided to employees is excluded from the employees’ taxable income.
3. Food and Beverage Expenses Associated With Employer-Operated Eating Facilities
Employers also may not deduct expenses for food or beverages associated with operating an employer-owned or employer-operated eating facility.
These costs can include food purchases, supplies, and related expenses connected to providing meals through the facility.
Important Exceptions to the Disallowance Rule
Although the general rule eliminates deductions for many employer-provided meal expenses, there are important exceptions.
Exception #1: Food or Beverages Sold to Customers
The disallowance rule does not apply when food or beverages are provided in connection with a business that sells those items to customers.
Example
Assume Employer operates a restaurant. As part of its business operations, Employer provides food and beverages to food service employees before, during, and after their shifts at no charge.
Because the restaurant’s business includes selling food and beverages to customers, the expenses associated with meals provided to its employees remain deductible.
Exception #2: Certain Specialized Industries
The deduction disallowance also does not apply to food and beverage expenses provided to:
- Crew members of certain commercial vessels
- Workers on certain oil or gas platforms or drilling rigs
- Certain workers in the fishing industry
These industries often require employees to remain at remote locations or work under conditions where employer-provided meals are a necessity.
Other Types of Meal Expenses That Remain Deductible
Examples of other 2026 meals expenses which remain fully deductible for tax include:
- Meals included in employee’s gross income
- Meals billed to and reimbursed by a client
- Company holiday parties for the benefit of employees other than highly compensated employees
Examples of other 2026 meals expenses 50% deductible for tax include:
- Employee meals while traveling for business purposes (retain documentation noting the business purpose)
- Offsite business meals or meals at offsite business meetings including with customers/clients (retain documentation noting the business purpose)
- Onsite employee breakroom snacks and drinks
What Employers Should Do Now
For 2026 meals expenses, employers should review their policies and record-keeping as well as discuss scenarios with their tax advisor. Key considerations include:
- Evaluating policies and record-keeping related to meals provided to employees required to remain on-site during work hours including for overtime or working lunch meetings.
- Plan for accounting records to reflect details of meal expenses by tax deductibility in 2026 (0% deductible, 50% deductible, or 100% deductible).
- Identifying whether any exceptions apply to the business.
- Consider meal expenses deduction disallowance in 2026 tax estimate calculations.
