The meals and entertainment deduction is one of the most misunderstood areas of business tax law. Since the Tax Cuts and Jobs Act (TCJA) overhauled the rules in 2018, business owners have struggled to determine which expenses qualify, which percentages apply, and what documentation they need. Understanding these rules matters, because getting them wrong can lead to disallowed deductions on audit or missed tax savings that add up over time.
This guide answers the central question business owners keep asking: what can I actually deduct for meals and entertainment in 2025 and 2026? It breaks down the current rules for deducting business meals and entertainment expenses, including what changed under the TCJA, how the temporary COVID-era provisions affected meal deductions, and where things stand today.
How the Tax Cuts and Jobs Act Changed Meals and Entertainment Rules
The Tax Cuts and Jobs Act, signed into law in December 2017, made sweeping changes to how businesses handle meals and entertainment expenses. Before the TCJA, businesses could generally deduct 50% of both meals and entertainment expenses, provided they were directly related to or associated with the active conduct of business.
The TCJA eliminated the deduction for entertainment expenses entirely, effective for tax years beginning after December 31, 2017. That means tickets to sporting events, golf outings, theater performances, and similar entertainment activities are no longer deductible, even when there is a clear business purpose. This was a significant shift that caught many business owners off guard during the first filing season under the new rules.
Business meal expenses, however, remained 50% deductible under the TCJA, as long as the meal is not lavish or extravagant and the taxpayer (or an employee of the taxpayer) is present. The IRS later clarified these rules through Notice 2018-76 and the final regulations under Section 274, providing guidance on how to separate meal costs from entertainment when the two are bundled together. The governing statute, Internal Revenue Code Section 274, sets out both the entertainment disallowance and the 50% meal limitation.
Current Rules for Deducting Business Meals in 2026
Business meals are currently deductible at 50% of the cost, the standard rate that has applied since the TCJA took effect. The temporary 100% deduction for restaurant meals, introduced under the Consolidated Appropriations Act of 2021, expired at the end of 2022. For the 2023, 2024, 2025, and 2026 tax years, the 50% limit is back in full effect for all qualifying business meals.
IRS requirements for the 50% meal deduction
To qualify for the 50% deduction, a business meal must meet several IRS requirements. The expense must be an ordinary and necessary business expense. The meal cannot be lavish or extravagant under the circumstances. The taxpayer or an employee of the taxpayer must be present at the meal. And if the meal is with a business contact, there should be a bona fide business discussion during, directly before, or directly after the meal.
Meals purchased while traveling for business also qualify for the 50% deduction. This includes meals during overnight business travel, meals at conferences and conventions, and meals purchased during client visits. The key requirement is that the travel itself must have a legitimate business purpose, a standard detailed in IRS Publication 463.
Why Entertainment Expenses Are No Longer Deductible
Entertainment expenses are fully non-deductible under current IRS business meals rules. The TCJA eliminated the entertainment deduction without exception, even when the entertainment is directly related to business activities. This includes costs for sporting events, concerts, country club dues, recreational outings, and any amusement or recreation activity.
Separating meal costs from entertainment on the same bill
There is one important nuance. If food and beverages are purchased separately from entertainment, the meal portion can still be deducted at 50%. For example, if you take a client to a baseball game and buy dinner at a nearby restaurant before the game, the dinner is 50% deductible while the game tickets are not deductible at all. If the food is part of the entertainment package, such as food included in a luxury suite, you need a separate invoice or receipt for the food costs to claim the meal deduction.
The IRS has been clear that businesses must keep entertainment and meal expenses on separate lines when they are billed together. Without separate accounting, the entire expense may be treated as non-deductible entertainment.
What Changed for Employer-Provided Meals in 2026
One of the most consequential developments for 2026 affects employer-provided meals. Under prior law, the cost of meals furnished to employees for the convenience of the employer on the employer’s business premises, along with the cost of operating an employer eating facility, was generally 50% deductible. That treatment ends for amounts paid or incurred after December 31, 2025.
A new Section 274(o), which was originally scheduled by the TCJA to take effect in 2026 and was then modified by the One Big Beautiful Bill Act of 2025, disallows the employer’s deduction for these costs. This includes meals furnished for the convenience of the employer that are excludable from employee income under Section 119(a), as well as food, beverage, and operating expenses tied to an employer-operated eating facility. In plain terms, on-site cafeteria meals, free snacks, coffee, and similar employer-provided food generally become nondeductible to the employer beginning in 2026, even though they may still be excluded from the employee’s taxable income.
The One Big Beautiful Bill Act added limited exceptions to this disallowance. Food and beverage expenses are still deductible when the establishment sells food and beverages to customers and also provides meals to its own employees, such as a restaurant feeding its staff, and when meals are provided to crew members on certain fishing vessels or at certain fish processing facilities. Employers that rely on company cafeterias or free meal programs should review these costs with their tax advisor before the 2026 filing season, because the change can meaningfully increase taxable income. For details on the statute, see the governing text of Internal Revenue Code Section 274.
Meals That Still Qualify for 100% Deduction
While the general rule is a 50% deduction, certain meal expenses remain 100% deductible. These exceptions are narrowly defined and apply to specific business situations.
Company events, promotions, and per diem meals
Other meals that remain fully deductible include food and beverages provided at company-wide events such as holiday parties and annual picnics. Meals provided to the general public as part of a promotional event are also 100% deductible. Meals included as taxable compensation to employees can be fully deducted by the employer, since they are treated as wages rather than meal expenses.
Meals that are reimbursed through a per diem arrangement follow separate rules. If the per diem rate used does not exceed the federal per diem rate for the location, the 50% limitation applies to the employer, while the employee reports no taxable income from the reimbursement.
Recordkeeping Requirements for Meal and Entertainment Deductions
Proper documentation is essential for any meals and entertainment deduction. The IRS requires contemporaneous records, meaning you should document the expense at or near the time it occurs rather than reconstructing records months later.
For every deductible business meal, you should record the amount of the expense, the date and location of the meal, the business purpose or nature of the business discussion, and the name and business relationship of each person present. Receipts are strongly recommended for any expense over $75, though best practice is to keep receipts for all meal expenses regardless of amount.
Best practices for organizing meal expense records
Businesses should also maintain a system for separating meal costs from entertainment costs on receipts that include both. Credit card statements alone are generally not sufficient documentation, because the IRS expects itemized receipts that show what was purchased.
For businesses using accounting software, creating separate expense categories for deductible meals (50%), non-deductible entertainment, and 100% deductible meals makes year-end tax preparation significantly easier and reduces the risk of errors on your return. Outsourced bookkeeping support through client accounting services can help establish and maintain this category structure throughout the year.
How the COVID-Era 100% Restaurant Meal Deduction Worked
Between January 1, 2021 and December 31, 2022, businesses could deduct 100% of the cost of meals purchased from restaurants. Congress passed this temporary provision as part of the Consolidated Appropriations Act of 2021 to support the restaurant industry during the pandemic.
The 100% deduction applied specifically to food and beverages provided by a restaurant. In IRS Notice 2021-25, the IRS defined “restaurant” as a business that prepares and sells food or beverages to retail customers for immediate consumption, whether on-premises or off-premises. This included traditional dine-in restaurants, fast food establishments, food trucks, and similar operations.
The 100% deduction did not apply to pre-packaged food or beverages from grocery stores, convenience stores, or similar retail establishments. It also did not change the rules for entertainment, which remained non-deductible throughout the temporary period.
This provision has now expired. For tax year 2023 and beyond, all business meals, whether purchased from a restaurant or elsewhere, are subject to the standard 50% limitation.
What Business Owners Should Do Now
Given the current state of the meals and entertainment tax deduction rules, business owners should take several practical steps to maximize their legitimate deductions while staying compliant.
First, review your expense categories. Make sure your accounting system distinguishes between deductible meals at 50%, meals that are 100% deductible (such as company-wide events), and entertainment expenses that are fully non-deductible. Lumping these categories together creates risk on audit and can lead to either over-reporting or under-reporting deductions.
Train your team and get professional advice
Second, train employees who submit expense reports. Staff members who regularly incur meal expenses, including salespeople, executives, and travel-heavy employees, need to understand which costs are deductible and how to document them properly. A brief written policy can prevent significant issues at tax time.
Third, consult with your CPA or tax advisor about your specific situation. The interaction between meals and entertainment rules, per diem arrangements, employee benefit rules, and state tax law varies by business type and structure. Working with a firm that offers tax advisory services can help you set up systems that capture every legitimate deduction without overstepping, and broader accounting services keep those systems aligned with the rest of your financial reporting.
Frequently Asked Questions
Are entertainment expenses tax deductible for businesses?
Entertainment expenses are not tax deductible under current law. The Tax Cuts and Jobs Act eliminated the entertainment expense deduction for tax years beginning after December 31, 2017. This applies regardless of whether the entertainment is directly related to business activities. Food and beverages purchased separately from entertainment events can still be deducted at 50%.
What is the current deduction percentage for business meals?
Business meals are deductible at 50% of the cost for the 2025 and 2026 tax years. The temporary 100% deduction for restaurant meals that applied during 2021 and 2022 has expired. To qualify, the meal must serve a business purpose, cannot be lavish or extravagant, and the taxpayer or an employee must be present.
What meals are 100% deductible in 2026?
Meals provided at company-wide social events like holiday parties and picnics are 100% deductible. Meals offered to the public as part of promotional activities and meals included as taxable compensation to employees are also fully deductible. The general 50% limit applies to most other business meal expenses.
What records does the IRS require for business meal deductions?
The IRS requires documentation of the amount, date, place, business purpose, and the names and business relationships of attendees for each business meal expense. Itemized receipts are recommended for expenses over $75. Records should be created at or near the time the expense is incurred, and meal costs must be separated from entertainment costs on combined receipts.
Can you deduct meals while traveling for business?
Meals during business travel are deductible at 50% of the cost. This includes meals during overnight trips, meals at business conferences, and meals purchased during client visits. The travel itself must have a legitimate business purpose, and the same documentation requirements apply as with any other business meal deduction.
What changed with the meals and entertainment deduction under the Tax Cuts and Jobs Act?
The TCJA eliminated the deduction for entertainment expenses entirely and kept the 50% deduction for business meals. Before the TCJA, both meals and entertainment were generally 50% deductible. The law also required businesses to separately account for meal and entertainment costs when they appear on the same receipt or invoice.
