Starting January 1, 2026, the tax treatment of employer-provided meals changes. A delayed Tax Cuts and Jobs Act rule, now found in §274(o) will make employer-operated cafeterias and “convenience of the employer” meals nondeductible, with few exceptions. Routine business and travel meals remain deductible, subject to the usual percentage limits.
The New General Rule
Effective for amounts paid or incurred after December 31, 2025.
- Employer-operated eating facilities as defined in §132(e)(2), including food and beverages for that facility and related de minimis items, become nondeductible under §274(o).
- Meals provided for the convenience of the employer under §119 become nondeductible under §274(o).
Fiscal year entities need to track the change carefully, so costs paid or incurred before January 1, 2026 are separated from costs on or after that date.
Where this comes from:
The Tax Cuts and Jobs Act (TCJA) added §274(o). Its effective date appears in the TCJA’s effective-date note: “The amendments made by this section shall apply to amounts incurred or paid after December 31, 2025.”
TCJA used a staged approach for budget rule reasons, moving many employer meal costs to 50% deductibility for 2018-2025, then to 0% beginning in 2026 for the two categories listed above.
The reason for the delayed rollout is that TCJA was enacted via budget reconciliation, which generally requires keeping costs within a 10-year budget window (the “Byrd Rule”). Many TCJA changes therefore phase in or sunset around 2025/2026; §274(o)’s disallowance was delayed until 2026 for budget reasons.
Impact on §274(o) From the One Big Beautiful Bill:
The One Big Beautiful Bill Act (OBBB) did not repeal §274(o). It made two narrow clarifications, effective for amounts paid or incurred after Dec. 31, 2025.
- §274(e)(8) Expenses for goods or services sold to customers for full consideration are not disallowed by §274(o). This protects restaurants and caterers with respect to meals they sell.
- §274(n)(2)(C) Certain meals in specified maritime, oil and gas, and fishing settings remain outside the standard percentage cap and are also not included in the §274(o) rule.
What is and is Not Deductible Starting January 1, 2026:
Still deductible in 2026 at 100%:
- Employee social or recreational events primarily for employees, e.g. a holiday party or annual picnic under §274(e)(4).
- Meals sold to customers for full consideration by restaurants and caterers under §274(e)(8)
- Meals in certain specified industries that qualify under §274(n)(2)(C), such as defined maritime, oil and gas, and fishing circumstances.
Still deductible in 2026 at 50% (or 80% for qualified transportation workers):
- Business meals that meet §274(k) where the employee is present, the expense is not lavish, and it is directly related to the active conduct of business. Examples include:
- Client or engagement work sessions, e.g. tax or audit planning.
- Technical trainings or workshops documented as bona fide business meetings.
- Firm operations meetings with a defined business purpose and agenda.
- Travel meals for employees while away from home on business.
- Pantry snacks not associated with an employer-operated eating facility stocked in a breakroom where no qualifying cafeteria is operated. Examples of which could include:
- Tea & coffee
- Soft drinks (soda, energy/sport drinks, protein drinks)
- Bottled water
- Fruit
- Single portion snacks (snack bars, protein bars, bags of chips, trail mix, etc.)
- Other light snack type foods unintended to be a meal replacement (yogurts, meet/cheese sticks)
Not deductible in 2026:
- Employer-operated eating facility costs and any food or beverage associated with such a facility, including “free snacks” if the snack program is part of or funded by the cafeteria operation.
- Meals provided for the convenience of the employer, for example meals provided on premises so staff remain available for emergencies or workload surges under §119 and §274(o).
Practical Tips for 2026 Coding and Compliance:
- Create segregated general ledger accounts. Keep cafeteria and convenience-of-employer meals in their own accounts to be disallowed in 2026.
- For 50% business meals, include an agenda or brief description, the attendees and the business purpose.
- For businesses that do not operate a §132(e)(2) facility, code break-room pantry items to a separate account to preserve the 50% deduction.
- Watch the paid or incurred date. Apply the rule based on when the expense is paid or incurred, including for fiscal-year taxpayers that straddle January 1, 2026.
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