You gotta eat, right? But when it comes to meals, what’s business and what’s personal? If it’s personal, nothing is deductible, but if it’s a business meal, how much is deductible? Some of the federal income tax rules changed for 2026 and beyond, while others remain the same. Here are 10 things to help you navigate the complexity of tax rules for the expense of business meals.
What to know:
1. Eating alone is a business deduction only in certain circumstances.
When you pick up coffee and a donut or bagel on the way to the office or take a lunch break at the neighborhood diner or order take-in, you can’t deduct the cost. While you likely wouldn’t have incurred the expense if you weren’t working, it’s still a nondeductible personal expense. Your meal costs are deductible only if you are:
- Traveling away from home on business (e.g., on a business trip).
- On a temporary work assignment (e.g., a self-employed person working on a three-week project out of town).
2. Wining and dining business customers usually is 50% deductible.
If you take a customer to breakfast, lunch, or dinner, or even buy food and beverages at an entertainment event (e.g., a ballgame) that you’re at, you can deduct half the cost for you and your customer. The cost of meals includes tips. The same rule applies for meals with potential customers, vendors, and other business associates.
3. No deduction is allowed for meals that are lavish or extravagant.
There’s no dollar amount for determining this; what is lavish and extravagant depends on the facts and circumstances. A business lunch for a Fortune 500 CEO probably is a little different from one hosted by a small business owner.
4. All deductions must be properly substantiated.
Special substantiation rules apply to business meals. Details are in IRS Publication 463. Without such documentation, you usually are barred from any deduction.
5. Standard meal allowances are subject to applicable limitations.
If you are traveling on business, you may rely on a standard meal allowance to simplify substantiating the cost of business meals. For the government’s fiscal year ending September 30, 2026, there are two rates you can use:
These rates are still subject to the 50% rate. Note: Self-employed individuals can use these rates for meals even though they are barred from using per diem rates for lodging.
6. Eating facilities aren’t deductible.
Businesses take note: The cost of an employer-operated eating facility (e.g., company cafeteria) are no longer deductible.
7. Some business meals are 100% deductible.
A business can write off the full cost of:
- Company events (e.g., summer picnics; holiday parties; company-wide retirement parties).
- Promotional samples made available to the general public.
- Meals for staff at restaurants or catering businesses, and for crews on commercial vessels, fishing boats, and offshore oil/gas platforms.
8. No deduction for meals for the convenience of the employer or on the employer’s premises.
Even though there is a substantial non-compensatory business reason for the employer to provide the meals (e.g., meals to employees on hand for emergencies; lack of easy access to food in the area; pizza for all employees on Fridays), after 2025 no deduction is allowed. But even though the employer cannot deduct the cost of meals, employees are not taxed on them.
9. No deduction by employees for their business meals.
Even if an employee meets one of the rules above (e.g., takes a customer out to lunch), no deduction can be claimed. Unreimbursed employee business expenses are not deductible, period! A better way to arrange this is for an employer to have an accountable plan that reimburses the employee for the expense. With an accountable plan, the employer deducts the cost subject to the 50% limit, and employee isn’t taxed on the full reimbursement (even though the employer deducts only 50%). What’s more there’s no employment tax on the reimbursement.
10. No deduction for taking turns paying.
The IRS has made it clear that if a group of business acquaintances takes turns picking up each others’ meal checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Just because two people work together and lunch together doesn’t make the meal a deductible expense.
Final thought
Gone are the days of the fully deductible “3-martini lunch,” a practice that was prevalent in the mid-1900’s. Who has the time now for leisurely luncheons or even meeting in person?
The Tax Reform Act of 1986 dropped what had been a 100% deduction for meal costs to 80%. The cap was lowered to 50% by the Revenue Reconciliation Act of 1993. A temporary 100% limit for restaurant meals was restored for 2021 and 2022 (when restaurants were hard hit by the pandemic) by the American Rescue Plan Act. The Tax Cuts and Jobs Act eliminated the deduction for de minimis fringe benefits and eating facilities, effective in 2026.
So, when it comes to the deduction for business meals, it’s easy to see that rules come and go. What will happen in the future? Who knows?
