Business Meal Deductions in 2026: What’s Still Deductible and What’s Not

The General 50 Percent Rule

Under §274(n)(1), the deduction for food and beverage expenses generally cannot exceed 50 percent of the otherwise deductible amount. Under Treas. Reg. §1.274-12(a), a business meal is deductible only if the expense is an ordinary and necessary business expense and:

• it is not lavish or extravagant under the circumstances;
• the taxpayer, or an employee of the taxpayer, is present when the food or beverages are furnished; and
• the food or beverages are provided to the taxpayer or a business associate, such as a customer, client, or supplier.

For example, if a business owner takes a client to lunch to discuss a project and the bill is $200, the deduction is generally $100.

The 100 Percent Restaurant Deduction Has Expired

A temporary exception allowed a full deduction for food and beverages provided by a restaurant, but only for amounts paid or incurred before January 1, 2023 (§274(n)(2)(D)). It was not extended. Restaurant meals in 2026 are subject to the general 50 percent limit.

Entertainment Is Not Deductible

Since 2018, §274(a) has disallowed deductions for activities generally considered entertainment, amusement, or recreation, such as tickets to sporting events or concerts, along with related facilities and club dues. Food and beverages provided at an entertainment event can still qualify as a 50 percent deductible business meal if they are purchased separately from the entertainment or their cost is stated separately on the bill or receipt.

Meals Provided to Employees: The 2026 Change

According to IRS Publication 15-B (2026), for amounts paid or incurred after 2025, an employer can no longer deduct the cost of food and beverages provided to employees through an eating facility that meets the requirements for de minimis fringe benefits, or provided for the convenience of the employer. Through 2025, these costs were 50 percent deductible. The change, in §274(o), was scheduled by the 2017 Tax Cuts and Jobs Act. The statute contains limited exceptions, including one for goods or services sold in bona fide transactions for full value and one for certain vessels and remote facilities.

Other employee meals and events are treated differently. Expenses for recreational, social, or similar activities primarily for the benefit of employees other than highly compensated employees, such as a holiday party open to all staff, are generally fully deductible under §274(e)(4). Meal costs that the employer treats as compensation and wages to the employee are also generally excepted from the 50 percent limit.

Meals While Traveling

Meals while traveling away from home overnight on business are generally subject to the same 50 percent limit. Under §274(n)(3), the limit is 80 percent for meals consumed while away from home by individuals subject to the Department of Transportation’s hours of service limits, such as certain interstate truck drivers.

Documentation

According to IRS Publication 463, deductions cannot be based on approximations or estimates, and a written record, including one kept electronically, is generally needed. For a business meal, keeping the receipt along with a note of who attended, their business relationship, and the business purpose is a practical way to support the deduction.

California Differences

California has not conformed to several of these federal changes. According to the Franchise Tax Board, California law does not conform to the federal disallowance of entertainment expenses or to related federal limits on employer fringe benefit deductions, so the California deduction for these items can differ from the federal deduction and may require an adjustment on the California return.

The Bottom Line

In 2026, business meals with clients and associates remain 50 percent deductible if they are not lavish, the taxpayer or an employee is present, and the business purpose is documented. Entertainment remains nondeductible, the restaurant exception has expired, and most employer-provided meals on the premises are no longer deductible, while events for all employees generally remain fully deductible.