By: CHARLES E. MARSTON, CPA, MST, President and Tax Principal, S.R. Snodgrass, P.C.
Beginning January 1, 2026, businesses of all types will lose out on some very common tax deductions related to employer-provided meals. Understanding these changes, and acting accordingly, is imperative to not only comply with the new rules but also to be certain not to lose legitimate deductions going forward.
Prior to the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, meals provided by an employer to its employees for the convenience of the employer, costs associated with certain employer-provided food/drink items that qualified as de minimis, and costs associated with the operation of on-site eating facilities for employees all were considered tax-deductible expenses, with a deduction limited to 50% of the cost.
The TCJA did away with these tax deductions beginning January 1, 2026. While the recently passed tax bill known as One Big Beautiful Bill Act “OBBBA” did provide some very narrow exceptions to this change, most taxpayers will be impacted by the elimination of these deductions. There are three types of deductions that will no longer be allowed:
Meals provided to employees for the convenience of the employer:
Employer-provided meals to employees that are considered to be for the employer’s convenience will no longer be 50% tax deductible. To be considered “for the convenience of the employer,” the meals must be:
- Furnished on the employer’s premises to employees, their spouses, or dependents;
- Be considered tax-free to the employee; and
- Have a business purpose other than providing additional pay to the employee.
Common examples of this type of expense can include:
- Lunch brought in during busy work hours so that employees do not have to leave the premises.
- Dinner brought in during overtime work hours so that work can continue.
- Breakfast provided on site for employees required to be on site early.
These types of expenses are very common for many businesses. After December 31, 2025, they will still be considered tax-free to the employee, but the 50% tax deduction the employer had been entitled to will be gone.
Cost of food and beverages provided to employees considered “de minimis” fringe benefits:
Employers have historically been able to provide “de minimis” food and beverages to its employees on site tax-free to the employees. The employer could also deduct 50% of these costs for tax purposes. This 50% deduction is now eliminated after December 31, 2025. To be considered “de minimis,” the value of the benefit, after taking into account the frequency provided by the employer, must be considered so small as to make accounting for it unreasonable or administratively impractical.
Common examples of this type of expense include:
- Coffee provided to employees.
- Small snacks and donuts provided in the break room for employees.
- Sodas and other drinks provided in a refrigerator for employees.
When looked at individually, the cost of any specific de minimis item will be minimal; however, in total, the cost can be significant to a business. Unfortunately, beginning January 1, 2026, the 50% deduction will no longer be available.
Cost of operating on-site eating facility for employees:
While this type of expense may not be as common as the previous two, there are many businesses that provide their employees with on-site cafeterias and dining rooms. These costs have historically qualified as de minimis benefits and have been considered tax-free to employees and 50% tax deductible for the employer. In general, the 50% employer deduction will no longer be allowed after December 31, 2025.
Given the changes described above, businesses will need to examine what types of meals they typically provide for their employees and how the tax deductions they have previously benefited from will be impacted. New accounts will most likely need to be established to record certain expenses that no longer will qualify for any tax deduction. It will also be important to review what costs are being recorded to specific accounts so that items that are still eligible for the 50% tax deduction, or in some cases, 100% deduction, are properly separated and tax deductions are not lost.
About the Author:
CHARLES E. MARSTON, CPA, MST
President, Tax Principal, S.R. Snodgrass, P.C.
Chuck Marston has over 25 years of experience in corporate return preparation and overall tax planning, including more than 20 years of experience working primarily with financial institutions and their tax needs. Chuck is particularly proficient in compliance issues and interpreting the varying complexities in IRS, state, and local taxing entities as they relate to the banking industry. His tax expertise and experience in the banking industry allow him to work with our tax clients to help them meet their tax compliance needs, understand the impact of their tax situation on overall business performance, develop appropriate tax strategies that are compatible with the specific goals of each institution, and stay aware of the current tax environment as it relates to the banking industry. Chuck has also worked with a wide range of business types, including closely held private and S corporations, limited liability corporations, and partnerships. He’s a member of the Pennsylvania and American Institutes of Certified Public Accountants. Chuck has published several articles on tax issues related to the banking industry and has been a speaker at various seminars.
About S. R. Snodgrass
Founded in 1946, S.R. Snodgrass is a privately held, multi-faceted public accounting and consulting firm, known for innovative tax, assurance, technology, and financial advisory services for financial institutions, nonprofits, and businesses of all kinds. The firm has worked with more than 175 financial institutions in 16 states and employs more than 90 professionals. The firm is ranked among the country’s top 300 public accounting firms according to Inside Public Accounting’s 2025 list. It maintains offices in suburban Pittsburgh and Philadelphia, along with Wheeling, West Virginia, and Steubenville, Ohio.
