Meals and entertainment deductions: what your company can still deduct

If you are categorizing meal receipts and trying to work out which ones your company can deduct, the answer depends on who ate the meal and why, not on how business-related it felt. The rules changed in 2018, changed again for 2021 and 2022, and changed again this January.

The current position is narrow. Entertainment is not deductible at all. Business meals with clients, and meals while traveling, are 50% deductible. Meals you provide to your own employees for your convenience, including office snacks and catered team lunches, moved from 50% to zero for amounts paid or incurred after December 31, 2025. A short list of categories remains fully deductible, and most of them are situations where the food is either taxable compensation or something you sell.

Here is each tier, what changed and when, and how the categorization should sit in your books.

Entertainment has been nondeductible since 2018

The Tax Cuts and Jobs Act removed the deduction for entertainment, amusement, and recreation expenses. Sporting event tickets, concert tickets, golf, and club dues are not deductible, regardless of how much business gets discussed.

The surviving exception is narrow and specific. Food and beverages purchased at an entertainment event are still deductible at 50% if they are purchased separately from the entertainment, or if the invoice states the food cost separately from the entertainment cost at a reasonable price. A single line item for a box at a game is entirely nondeductible. The same box with catering itemized separately gets you a 50% deduction on the catering.

This is a documentation outcome rather than a tax planning one. Ask for a separately stated invoice at the point of purchase, because it cannot be reconstructed later.

The 100% restaurant deduction expired at the end of 2022

For 2021 and 2022 only, food and beverages purchased from a restaurant were fully deductible under the Consolidated Appropriations Act. That provision was temporary and it lapsed on December 31, 2022.

This matters because a large volume of published guidance still describes it in the present tense. If you are reading something that tells you restaurant meals are fully deductible, or that you should take advantage of the 100% rate while it lasts, you are reading advice written for the 2022 tax year. Business meals returned to 50% for 2023 and have stayed there.

Employer-provided meals changed at the start of 2026

This is the change most likely to affect your numbers and the one least likely to be in the guidance you find.

Under the TCJA, meals provided for the convenience of the employer, along with de minimis food and beverages and the costs of an on-site eating facility, were cut from fully deductible to 50% deductible for 2018 through 2025. That 50% treatment was written with an expiration date. For amounts paid or incurred after December 31, 2025, the deduction is eliminated rather than halved, subject to narrow statutory exceptions.

In practice, for the tax year you are in now, that means office snacks, coffee, catered lunches brought in so the team keeps working, and meals at a company cafeteria are nondeductible. If your books still categorize them at 50%, the return will be wrong. Confirm the exceptions that were preserved before you zero out every category, because a few industries kept theirs.

The deduction tiers are a chart of accounts problem

Most companies that get this wrong are not making a judgment error. They are running a single "Meals and entertainment" account and applying one percentage to it at year end. The tiers have to be separated at the point the transaction is recorded, because the facts that determine the tier are only available then.

Fully deductible. Meals treated as taxable compensation to the employee and reported on a W-2, or reported on a 1099 to a nonemployee. Food and beverages provided to the general public, for example at an open house or a booth. Food you sell to customers in the ordinary course of business, which is inventory rather than a meals deduction. Recreational or social activities primarily for the benefit of employees generally, such as a company holiday party or a summer outing, provided the benefit is not skewed toward highly compensated employees.

Half deductible. Meals with clients, prospects, vendors, or other business contacts where you or an employee is present and the expense is not lavish. Meals while traveling on business, including the meals portion of a per diem. Food separately stated on an entertainment invoice. Meals at a conference or convention that are not included in the registration fee.

Not deductible. Entertainment in any form. Club dues. Employer-provided meals for your own convenience, as of this year. Any meal where nobody from the company was present. The transportation cost of getting to a business meal, which is a travel expense rather than part of the meal.

Separate accounts for these tiers make the return a mapping exercise instead of a reconstruction. Our Books product handles this categorization as transactions come in, which is the point at which anyone still remembers who was at the dinner.

Substantiation is five facts, and the receipt threshold is low

Section 274(d) requires more than a receipt. For each meal you need the amount, the date, the place, the business purpose, and the business relationship of the people present. A credit card statement gives you two of the five.

The documentary evidence requirement generally applies to expenses of $75 or more, which is lower than most people assume and has not moved in a long time. Below that threshold you still need the five facts, just not necessarily the receipt itself. The practical approach is to capture the purpose and the attendees in the transaction memo when the charge posts, because that is a ten second task then and a forensic exercise in March.

Records built after the fact are weaker than records built at the time, and that difference is what gets tested if the deduction is ever examined.

Where it lands on the return depends on your entity

If you file a Schedule C as a sole proprietor or single-member LLC, deductible meals go on Line 24b. Corporations and partnerships report them within deductions on Form 1120, Form 1120-S, or Form 1065.

The part that catches people is the disallowed half. Your books record the full expense, because you spent the full amount, and the return deducts a portion of it. The difference is a permanent book to tax difference and it shows up as an adjustment on Schedule M-1 or M-3. If your bookkeeping does not separate the tiers, that adjustment has to be estimated, and an estimated permanent difference is exactly the sort of thing that invites questions.

The bottom line

The deduction is now narrow enough that the planning question is mostly a bookkeeping question. Separate your meal categories by deductibility tier in the chart of accounts, capture the purpose and attendees at the point of the transaction, and ask for separately stated invoices whenever food is bought alongside anything that counts as entertainment. The change that will actually move your numbers this year is the elimination of the employer-provided meals deduction, because it hits a category most companies have been deducting at 50% out of habit since 2018. Anything you read that still describes restaurant meals as fully deductible was written for a rule that expired three years ago.

Frequently asked questions

Are business meals 100% deductible in 2026?

No. The temporary 100% deduction for restaurant meals applied only to 2021 and 2022 and expired on December 31, 2022. Business meals with clients and meals during business travel are 50% deductible. A small set of categories remains fully deductible, mainly meals treated as taxable compensation, food provided to the general public, and company-wide social events.

Can I deduct taking a client to a sporting event?

Not the tickets. Entertainment expenses have been nondeductible since 2018, so the cost of the seats gets no deduction regardless of the business discussed. Food and drink at the event can be 50% deductible if it is purchased separately or stated separately on the invoice at a reasonable price.

Are office snacks and team lunches still deductible?

Not for amounts paid or incurred after December 31, 2025. Meals provided for the employer's convenience, de minimis food and beverages, and on-site eating facility costs were 50% deductible from 2018 through 2025, and the deduction was eliminated after that, subject to narrow exceptions. Check whether your industry kept one before you change the treatment.

Do I need a receipt for every business meal?

Documentary evidence is generally required for expenses of $75 or more. Below that you still have to record the amount, date, place, business purpose, and the business relationship of everyone present, so the receipt is the easier half of the requirement rather than the whole of it.

What makes a meal lavish or extravagant?

There is no dollar threshold. The test is whether the expense is reasonable given the circumstances, so an expensive restaurant is not disqualifying by itself. Practically, the risk sits with meals that are unusual relative to the rest of your spending and hard to tie to a business purpose.

Is the cost of getting to the meal deductible?

Transportation to and from a business meal is not part of the meal deduction. It is treated as a travel or transportation expense under its own rules, which means it is not subject to the 50% limit that applies to the food.