Starting January 1, 2026, significant changes will take effect regarding the deductibility of certain business meal expenses.
The 2025 Act introduces new restrictions on employer deductions for food and beverage expenses that are excluded from employee income.
The general rule is that, for amounts incurred or paid after December 31, 2025, no deduction will be allowed for:
- Any expense for the operation of an employer-operated eating facility described in Internal Revenue Code (IRC) Section 132(e)(2).
- Any expense for food or beverages, including de minimis fringe benefits, associated with an employer-operated eating facility.
- Any expense for meals furnished on the employer's business premises for the convenience of the employer as described in IRC Section 119(a).
This change primarily affects non-restaurants and non-catering businesses. The 2025 Act completely eliminates the deduction for meals provided for the convenience of the employer for these types of businesses.
However, there are important exceptions to this general rule. Deductions will still be allowed for:
- Expenses related to sales to customers.
- Food and beverages provided to certain crew members or oil and gas workers.
It's worth noting that these changes represent a significant shift from the previous rules. Prior to 2026, many of these expenses were partially deductible, subject to certain limitations.
For tax professionals and businesses, it will be crucial to review and potentially adjust policies related to employee meals and employer-operated eating facilities in light of these upcoming changes. The loss of these deductions may have a substantial impact on the overall tax strategy for affected businesses.
As with any major tax law change, it's important to stay informed about any additional guidance or regulations that may be issued by the Internal Revenue Service (IRS) to clarify the implementation of these new rules. Contact the tax experts at Hall Kistler for more information and assistance in this area.