Providing coffee, drink, snacks, and meals in the office goes a long way to improve and/or maintain employee morale. There are times when providing meals for employees who work late and/or overtime is convenient to the employer as it aids workplace efficiency.
Outside of the office, business meals are necessary when away from home on business trips, attendance at conventions and meeting with business prospects. While all of these situations are valid expenses of running a business, it was also a business tax deduction.
However this will no longer be the case beginning with your 2026 business tax return. IRS has provided greater clarification on deductible business meal expenses. The business can still expense these items for accounting book purposes.
it is recommended to record deductible business meal expenses into accounts identified by their tax deduction opportunity as the expenses occur. Otherwise, additional time (and tax preparation expense) will occur at tax time to review accounting entries for deductible vs non-deductible meal expenses.
Recommended Chart of Accounts:
Meals at 0%: Convenience of the Employer
o Office coffee / drinks / snacks / food brought in for staff meetings.
o Any meals provided at the convenience of the employer for working overtime, working late, outside of normal working hours.
Meals at 50%: Travel related
o Travel away from home or office including overnight business trips, airports, etc.
o Attending a business convention, business meeting, or business luncheon at a club.
o Meals with business prospects or clients PROVIDED an employee is present and the meal is not lavish or extravagant.
Meals at 100%:
o Meals treated as taxable compensation to the employee.
o Food, NOT Entertainment, at company-wide events, holiday staff parties, team building.
o Meals offered to the general public for marketing or promotional purposes.
o Industry-specific exceptions: restaurant or catering business provides meals to employees and sells food and beverages to customers in a bona fide transaction.
Use this link to obtain a Business meals, travel, and entertainment deductibility checklist to aid in categorizing expenses.
Any accounting, business, Medicare or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement is the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.