Deductible Business Meals & Entertainment in 2026

Deductible Business Meals & Entertainment in 2026

Business meals and entertainment get tougher to deduct starting in 2026. The recent tax law change (often called OBBBA) tightens the rules on both what you can deduct and at what percentage.

Big picture for 2026

• Many business meals that used to be partially deductible will no longer be deductible at all.
• Entertainment costs (like game tickets or golf with clients) remain completely nondeductible, as they have been in recent years.
• Some important exceptions still allow full or partial deductions, especially for travel meals, employee events, and businesses that sell food or entertainment.

How business meals work in 2026

1. Most on premise employee meals are no longer deductible

Starting in 2026, the tax law takes away deductions for many meals that were historically 50% deductible.

Examples that generally become nondeductible for employers:

• Meals provided on the company’s premises mainly for the employer’s convenience (for example, so staff stay on site during busy periods).
• “Free food” at company cafeterias and similar employer-operated eating facilities, even if treated as small or “de minimis” perks to employees.

These meals may still be tax‑free to employees under existing rules, but the employer will not get an income tax deduction for the cost.

2. Business meeting meals are still partly deductible

Meals are still 50% deductible if the taxpayer or their employee is present, and food/beverage is provided to a current or potential client, customer, consultant, or similar business contact.

3. Travel meals are still partly deductible

Travel meals remain one of the main categories where a deduction is allowed:

• When you or your employees travel away from home overnight for business, 50% of reasonable meal costs is still deductible, assuming normal substantiation (who, where, when, and business purpose).
• Certain long‑haul transportation workers (for example, some truckers and airline crews) can usually deduct 80% of qualifying travel meal costs.

4. Employee parties and similar events stay fully deductible

There is a favorable exception for employee morale events:

• Meals and related costs for social events primarily for rank‑and‑file employees (not mainly for owners and top executives) remain fully deductible.

Common examples:

• Company‑wide holiday parties
• Annual summer picnics
• Other similar social events open to most employees

5. Meals that are part of what you sell

If your business sells food or beverages to customers, the rules are better:

• The cost of meals and drinks that are part of what you sell (such as restaurant meals, catering services, event packages that include food, etc.) remains fully deductible as a normal business cost.

This change is aimed at “perk” meals for employees, not at businesses whose very product is food or beverage.

6. A narrow industry exception: certain fishing operations

Congress created a special rule for a very specific industry:

• 100% of meal costs can be deductible if they are provided for employees working on certain fishing or fish‑processing vessels, or at certain fish processing facilities located in remote northern U.S. areas.

For most businesses, this exception will not apply, but it is very valuable for those that qualify.

Entertainment expenses in 2026

1. Client entertainment is still not deductible

The rules that disallowed most entertainment expenses a few years ago are still in place and were not relaxed by the latest law:

• Things like sports tickets, theater outings, golf with clients, hunting trips, and similar entertainment are not deductible at all, even if there is a clear business purpose.
• Dues for social clubs, golf clubs, and similar organizations also remain nondeductible.

There is no return of the old “50% deductible entertainment” rule.

2. When entertainment can still be deducted

There are a few important exceptions where entertainment‑type costs can still be written off:

• Employee social events
• The same employee parties and similar events described above can include entertainment (e.g., DJ, bowling, amusement park entry) and still be fully deductible if mainly for non‑highly‑compensated employees.
• Entertainment that you sell
• If entertainment is part of what your business sells (for example, a tour operator that bundles show tickets, or a cruise line providing onboard entertainment), the related costs are generally deductible as part of providing that product or service.
• Items treated as income to the recipient
• In some cases, if you treat the cost as taxable compensation to an employee (or as taxable income to a non‑employee recipient) and report it properly, the business may be able to deduct the expense even if it looks like entertainment.

What businesses should do now

1. Clean up your general ledger categories
• Separate your accounts so you can clearly track:
• Travel meals (50% or 80% deductible),
• Employee social events (generally fully deductible),
• Meals sold to customers (fully deductible),
• Nondeductible perks and entertainment.
2. Re‑think on‑site meal programs
• Free or discounted meals for employees on company premises may now be significantly more expensive on an after‑tax basis because the company cannot deduct them.
3. Tighten documentation for travel
• For travel meals, keep basic records: date, location, amount, who traveled, and the business reason for the trip. This supports keeping the 50% (or 80% for eligible workers) deduction.
4. Review reimbursement policies
• How you reimburse employees (for example, detailed expense reports vs. flat allowances) affects where the deduction limit applies and whether some costs are instead treated as taxable wages.

For 2026 and beyond, the theme is simple: expect fewer tax breaks for meals and none for typical entertainment, with narrow but valuable exceptions for travel, employee events, and businesses that sell food or entertainment.

Please contact your KWC tax advisor to discuss how these changes affect you.