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Business Meals and Entertainment

The Tax Cuts and Jobs Act (TCJA) significantly changed the rules on business meal and entertainment deductions. Most entertainment expenses became non-deductible, though the law continued to allow deductions for certain business meals and meals provided to employees. From 2018 through 2025, the IRS treats meals provided to employees either as a de minimis fringe benefit or as meals furnished for the employer’s convenience. In both cases, employers could deduct 50% of the cost.

The One Big Beautiful Bill Act (OBBBA) restricts these rules even further. Under the OBBBA, both categories of employee meals are generally non-deductible beginning in 2026. A very limited exception remains: a 50% deduction is allowable for meals provided to:

  • Crews of certain commercial vessels
  • Oil platform and drilling rig workers
  • Crews of qualifying fishing vessels and processing facilities

Recap of Deduction Rules

Here’s a breakdown of business meal and entertainment expense deductions:

A. Entertainment Costs

  • Client entertainment (sporting events, theater tickets, golf outings, yacht excursions, etc.) – Not deductible.

B. Meals Included with Entertainment

  • Meals bundled with entertainment and not separately stated – Not deductible.

C. Client Business Meals

  • Meals with clients in connection with a bona fide business meeting – 50% deductible.

D. Employee Meals (Employer Convenience)

  • Meals for the employer’s benefit (seminars, in-office coffee/snacks, etc.) – 50% deductible for tax years 2018–2025, but non-deductible from 2026 onward, except for employees in the three specific industries listed above.

E. Employee Special Occasion Meals

  • Meals for holiday parties, company picnics, and similar events – 100% deductible.

Substantiation Requirements

The IRS enforces strict documentation rules for business meal deductions. For each expense, you must record:

  1. Date of the expense
  2. Place of the expense
  3. Amount of the expense
  4. Names of the participants
  5. Business purpose of the meal (e.g., seeking a new client, negotiating vendor terms)

Timely documentation is critical. When I was with the IRS auditing taxpayers, I would encourage taxpayers to jot down the name or names of the individuals in attendance and the purpose directly on the back of the restaurant receipt immediately after the meal. I give the same advice to clients today—once it becomes a habit, it’s easy and protects you in the event of an audit.