Changes to Meal Deductions Take Effect in 2026

As part of the recently passed One Big Beautiful Bill Act (OBBBA), several long-standing business tax deductions related to employer-provided meals and snacks will be significantly reduced or eliminated beginning January 1, 2026. These changes will affect many employers’ internal food offerings and could lead to increased taxable income for businesses that don’t adjust their policies.

While some meal deductions remain unchanged, the most notable update is the complete phaseout of the tax deduction for meals provided on-site for the employer’s convenience – including snacks, coffee, and cafeteria offerings.

What’s Changing in 2026

Employer-Provided Meals

Starting in 2026, businesses will no longer be able to deduct the cost of meals provided to employees on business premises for the employer’s convenience. These meals were previously 50% deductible and commonly included cafeteria lunches, catered meeting meals, or food meant to keep employees on-site for operational reasons. This represents the end of a long-standing deduction that has been in place for decades.

De Minimis Fringe Meals

Also eliminated in 2026 is the deduction for meals and snacks that previously qualified as de minimis fringe benefits. This includes smaller, everyday items like breakroom coffee, snacks, and light refreshments—also previously 50% deductible. These items, while small in cost, can add up for businesses that regularly stock their offices.

Limited Exceptions to the New Rules

The OBBBA does carve out a few exceptions to the full disallowance of on-site meal deductions. Notably:

• Restaurants can still deduct the cost of meals provided to employees, such as kitchen and waitstaff, as part of their normal business operations.
• Businesses in the Alaskan fishing industry also receive a targeted exemption under specific provisions of the law.

Outside of these limited industries, the deduction for employer-provided meals on premises will be entirely phased out.

What Hasn’t Changed

Some meal deductions remain intact for 2026 and beyond. These include:

• Business travel meals: Meals incurred while traveling for work continue to be 50% deductible, assuming they meet standard IRS requirements (ordinary, necessary, not lavish, and the employee must be present).
• Client or prospect meals: Entertaining clients or prospective clients over meals still qualifies for a 50% deduction, provided the expenses are directly related to business.
• Team-building or social outings: Food and beverages provided during recreational or team-building events available to all employees remain 100% deductible.
• Promotional or public-facing events: Meals served during seminars, product launches, or other events open to the public also remain fully deductible.
• Taxable employee compensation: If meals are provided to employees and treated as taxable compensation, they remain 100% deductible.

Key Actions for Businesses

With these changes just months away, businesses should begin planning for their impact now. Here are a few key considerations:

• Review and adjust budgets: If your business routinely provides meals or snacks to employees, it’s important to reassess how much of those costs will still be deductible in 2026. You may need to revise internal food policies accordingly.
• Consider employee communication: Employees accustomed to on-site meals or snacks may need to be informed of potential changes, especially if offerings will be reduced or phased out.
• Plan for increased taxable income: With fewer deductible meal expenses, some companies may see an increase in taxable income starting in 2026.

Looking Ahead

These changes mark a meaningful shift in how everyday business expenses are treated under the tax code. While some businesses may experience only minor adjustments, others—particularly those that offer comprehensive food programs—will need to reevaluate their practices.

LMC is closely monitoring these updates and helping clients prepare for the 2026 changes. If you have questions about how the new rules may affect your business or would like help planning for compliance, please reach out to your LMC professional.