Starting January 1, 2026, employers will be subject to significant limitations when it comes to deducting certain meal related expenses. Originally enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA), these changes have remained largely out of focus for many employers due to the delayed effective date. It’s wise to assess the impact of these new limitations heading into the new year. Here’s what you should know.

Why It Matters

For many employers, on-site meals, snacks, and cafeterias are part of daily operations, not just perks. Losing the related tax deductions could increase after-tax costs and affect budgets, employee support programs, and overall tax planning. Understanding the changes ahead of time gives businesses the opportunity to plan, adjust, and avoid unexpected impacts when the new rules take effect.

What are the current rules for employer-provided meals?

Current rules (effective through December 31, 2025) allow employers to deduct 50% of the cost of meals provided on their premises as long as the meals are offered for business reasons. Business reasons generally mean meals are provided to keep operations running, such as when employees can’t easily leave the workplace, must remain available, or work in locations where getting food elsewhere isn’t practical.

What is changing?

Effective January 1, 2026, these expenses will be entirely non-deductible for tax purposes. While these costs must continue to be tracked for accounting and recordkeeping purposes, they will no longer reduce taxable income once the new rules take effect.

Who will be impacted by the new rules?

Any business that routinely provides food on-site will be affected by the new limitations. The impact may be more pronounced for employes whose operations make leaving the workplace difficult or impractical. This might include financial institutions, healthcare providers, professional services firms and businesses operating shift based schedules/extended hours.

Do any meals still qualify for the deduction?

Expenses generally eligible for a 50% deduction include:

• Meals with clients or prospects where business is conducted and a company representative is present
• Meals incurred while traveling for business purposes, when ordinary and necessary
• Food provided during business meetings, including internal strategy sessions or meetings with directors or shareholders

Expenses that may qualify for a full deduction include:

• Meals associated with employee-wide recreational or social events, such as holiday parties or appreciation gatherings
• Meals offered to the general public at no charge as part of promotional or marketing activities
• Meals treated as taxable wages and reported on employees’ Forms W-2
• Certain meals provided to crew members on qualifying vessels or offshore facilities

What steps should employers take now?

As the effective date approaches, businesses should start taking a closer look at their meal-related expenses and policies. Key steps include:

• Reviewing existing meal programs, such as on-site cafeterias, snacks, and other employer-provided food
• Assessing how these costs are currently budgeted and whether the loss of deductions will increase overall expenses
• Verifying documentation and expense tracking to clearly distinguish between deductible and nondeductible meal costs
• Identifying which meal expenses may still qualify for partial or full deductibility under the new rules
• Evaluating how the changes may impact employee benefits, internal policies, and long-term tax planning