Understanding the New Business-Meals Rule: What Every Business Should Know

When you’ve been using deductions for business meals, snacks, office lunches or employer-provided food, new law changes under the One Big Beautiful Bill Act (OBBBA) mean you’ll want to pay extra attention. The rules around meal and entertainment deductions are shifting — and for many businesses, the consequences will matter.

What’s Changing Under OBBBA

• Currently, many business meals and food/beverage expenses are 50% deductible, provided certain IRS rules are met.

• Under the OBBBA, effective January 1, 2026, section 274(o) will disallow 100% of employer expenses for certain meals: those provided in employer-run facilities or for the employer’s convenience.

• The bill also adds exceptions for certain industries (for example, meals provided on vessels or certain fish-processing facilities) so that the full disallowance may not apply in those cases.

Why It Matters for Your Bookkeeping & Tax Planning

• If your business provides meals to employees (on-site cafeteria, free snacks, subsidized lunches, beverages) and you’ve been treating them as deductible, you need to review and potentially change your treatment for amounts paid after December 31, 2025.

• Proper documentation remains critical: the expense purpose, who benefited, where and when it occurred. These rules already apply for business meals and entertainment.

• Because the deduction will be disallowed (in many cases) after the effective date, you’ll want to adjust your budgeting, tax planning and employee benefit strategy now — not when you’re already doing your year-end close.

What Businesses Often Misunderstand

• Misunderstanding: “We provide meals to employees – we can deduct them like before. ”Clarification: After 12/31/2025, many “employer convenience” meals will no longer be deductible — at least not in the open way they once were.

• Misunderstanding: “The rules only affect meals when out with clients. ”Clarification: The change targets employer provided meals or food/beverages in employer-run contexts, not just client meals.

• Misunderstanding: “We’ll figure it out after the year ends. ”Clarification: Because the effective date is 1/1/2026, planning now helps avoid surprises.

• Misunderstanding: “This is only relevant for big companies. ”Clarification: Even small businesses that offer employee meals, beverages, or run a cafeteria could be affected.

Key Questions & Answers

Q: Does this mean I cannot deduct any business meals at all? A: No — the classic “business meal with client/supplier/employee where business discussion occurs” rules still apply (under 50% deductibility in many cases). The change primarily hits employer-provided meals for convenience or in on-site facilities.

Q: When does this rule take effect? A: For most affected items, expenses paid or incurred after December 31, 2025 are subject to the disallowance.

Q: How should I handle meals in my bookkeeping now? A:

• Tag and track meals that are client/business associate meals vs. employer-provided meals for convenience.

• For employer-provided meals expected to lose deduction status, consider how costs will be handled (e.g., taxable to employee, cost absorbed by employer, change benefit structure).

• Consult your CPA/bookkeeper now to map which expenses will be impacted and build a strategy.

How Hamm Accounting Firm Can Help

At Hamm Accounting Firm, we’re ready to assist you with:

• Reviewing your current meal & food/beverage expense categories and how the new rule will affect you.

• Preparing your bookkeeping set-up so that you separate items that will remain deductible vs those that may not.

• Coordinating with your tax advisor to adjust your year-end tax planning, forecast tax impact, and update employee benefit strategies if needed.

📅 Need help reviewing your meals policy or expense tracking ahead of 2026? Contact Hamm Accounting Firm — we’ll help make sure your books and benefits align with the new rules.

Written by Melissa Crowe, Senior Bookkeeper, Hamm Accounting Firm LLLP