Meal Deductibility Changes Under the OBBBA

With the recent passage of the One Big Beautiful Bill Act (OBBBA), important changes to meal deductibility will take effect beginning in 2026. As your accounting advisors, we want to ensure you are informed about how these updates may impact your business’s tax planning and record-keeping. While many existing rules around business meals remain in place for 2025, the new legislation introduces adjustments that could affect the percentage of deductible meal expenses going forward.  Understanding which category an expense falls into helps ensure accurate reporting and maximizes allowable tax benefits.

Business meal expenses fall into three categories for tax purposes:

Nondeductible Meals

• Items that are considered personal, entertainment-related, or insufficiently connected to business activities remain nondeductible.
• Beginning in 2026, meals provided for the employer’s convenience (such as meals during required training or overtime) or in a company-operated cafeteria will be completely nondeductible.
  • One exception to this rule is a restaurant providing meals to its employees during their shift, which is 50 percent deductible.

50 Percent Deductible Meals

• This category covers most ordinary business meals, such as dining with clients or employees where business is discussed, as well as employee travel meals. In these cases, half of the cost remains deductible.

100 Percent Deductible

• Office holiday parties and meals included as part of taxable employee compensation remain fully deductible.

These upcoming changes mean that far fewer meals will qualify for full deductibility beginning in 2026, making it more important than ever to properly classify meal expenses. Businesses should be prepared to separate costs clearly among the meal categories to ensure accurate reporting. To prepare for the 2026 meal deductibility rules, businesses can revise their chart of accounts by creating three separate meal expense accounts that align with the IRS categories: Nondeductible Meals, 50 Percent Deductible Meals, and 100 Percent Deductible Meals. This structure allows each type of meal expense to be recorded accurately at the time of entry, reducing year-end adjustments to streamline tax preparation and ensuring compliance with the new limitations. Taking these steps now will help you avoid surprises at tax time and ensure you continue to maximize the tax benefits available for business meals under the updated law.

If you have any questions or concerns, please reach out to your BMSS professional and we would be happy to assist you and your business. You can reach us by calling (833) CPA-BMSS or by visiting our website for contact information.