Episode 113 of Concrete Numbers · 4 min watch
Entertainment such as golf, ballgame tickets and concerts has been nondeductible since 2018, and the One Big Beautiful Bill Act did not bring it back. Business meals with clients, suppliers and employees are still generally 50% deductible. What changed on January 1, 2026 is narrower: employer-provided meals for the employer’s convenience, and food tied to an employer eating facility, are now nondeductible.
What the 2025 law actually changed
Section 274(o) disallows any deduction, for amounts paid after December 31, 2025, for meals furnished for the employer’s convenience under section 119(a) and for operating an employer eating facility under section 132(e)(2), including the food tied to it. IRS Publication 15-B calls this a scheduled change that ended the 50% deduction allowed through 2025.
The One Big Beautiful Bill Act (Public Law 119-21, section 70305) kept that rule and added carve-outs: food sold to customers for full value, which covers a restaurant feeding its staff, and meals on certain fishing vessels and fish processing facilities. It did not reopen entertainment. For the wider picture, see our contractor deductions and records hub.
Entertainment is still out
Under section 274(a) and Treasury Regulation 1.274-11, no deduction is allowed for an activity generally considered entertainment, amusement or recreation, even when it helps you win work. Examples include sporting events, theaters, golf and country clubs, and hunting and fishing trips, plus social and athletic club dues. The test is objective, so calling golf with a general contractor “business development” changes nothing.
Business meals: 50% when the conditions are met
Treasury Regulation 1.274-12 allows 50% of a meal when it is not lavish or extravagant, you or your employee is present, and the food is for you or a business associate. A business associate includes a current or prospective customer, client, supplier, employee or adviser. The IRS first laid out this framework in Notice 2018-76. Tax and tip count as part of the meal.
Meals at an entertainment event need one more step. Food bought separately from the tickets, or stated separately on the bill at a reasonable price, can be 50% deductible. If a suite package lumps everything together, the whole amount is nondeductible.
Hypothetical: you spend $400 on dinner with a developer to discuss an upcoming bid. If the conditions are met, $200 is deductible federally. Meals are among the deductions contractors often get wrong.
Feeding a jobsite crew after 2025
Publication 15-B treats a meal as furnished for your convenience when there is a substantial business reason other than giving the employee extra pay; a written policy statement alone is not enough. Crew meals furnished on your business premises for that reason fit section 119(a) and are nondeductible from 2026. The meal can still be tax-free to the worker. Only the employer’s deduction went away.
A meal you report as wages falls under section 274(e)(2) and escapes the limits, but it adds payroll tax, a tradeoff covered in our payroll mistakes episode. Occasional crew food is less settled. The statute ties de minimis food to an eating facility, while the IRS’s plain-language summary lists “small occasional perks like coffee or snacks” as no longer deductible. Document why and how each crew meal is provided. Our contractor payroll health check reviews this with other fringe benefits.
Meals that can still be 100% deductible
Section 274(n)(2) lifts the 50% limit for several items in section 274(e):
- Compensation: meals reported as wages, or included in a nonemployee’s income and reported on an information return.
- Employee events: social activities primarily for employees, such as a holiday party or picnic, that do not favor highly compensated employees.
- Public refreshments: food offered to the general public, such as at an open house, for the share the public eats.
- Sales: food sold to customers for full value.
- Reimbursed meals: under a reimbursement arrangement, the limit falls on one party, not both.
Wage reporting for these items belongs in your payroll and worker classification process.
Travel meals and records
Meals on overnight trips to an out-of-town job carry the same 50% limit plus the section 274(d) record rules. Publication 463 lets you use the standard meal allowance, the federal M&IE rate published by GSA, which varies by location and federal fiscal year, instead of actual cost. The 50% limit still applies, and you still record time, place and business purpose. Workers under Department of Transportation hours-of-service limits can deduct 80%. Mileage is separate; see our 2026 vehicle write-off rules.
Section 274(d) asks for the amount, time and place, business purpose and business relationship of the people involved. Write that on each receipt and set up separate bookkeeping accounts for entertainment, client meals, employee events and crew meals. Keep them for the required retention period, since undocumented meal totals are a common audit pressure point. Our tax and bookkeeping services include setting up those accounts.
California treatment
The FTB’s 2025 Schedule CA (540) instructions say California does not conform to the federal entertainment disallowance or the expanded meal limits, and filers report the difference as an adjustment. California’s conformity date, set by SB 711, is January 1, 2025, before the One Big Beautiful Bill Act, so confirm the state treatment of 2026 meal costs before filing.
Frequently asked questions
Can I deduct golf or game tickets for a client?
No. Entertainment has been nondeductible since 2018, and the 2025 law did not change that. Food bought or billed separately at a reasonable price can still be 50% deductible if the meal conditions are met.
Are crew lunches on the jobsite still deductible in 2026?
Not if they are convenience-of-employer meals under section 119(a) or food tied to an employer eating facility. Meals reported as wages are treated differently, and occasional crew food is not fully settled. Our fringe benefit mistakes episode walks through the payroll side.
Is the company holiday party fully deductible?
It can be. Social events held primarily for employees are outside the 50% limit if they do not favor highly compensated employees.
Does California follow the federal meal and entertainment rules?
No. The FTB says California does not conform to the federal entertainment disallowance or expanded meal limits, so the difference is reported as an adjustment. Our state and local tax episode covers other California differences.
Are your crew and client meals coded right?
We can review how your business records entertainment, client meals, employee events and crew meals, and set up categories that match the 2026 rules.
Verified against IRC §274, Treas. Reg. §§1.274-11 and 1.274-12, IRS Notice 2018-76, IRS Publications 463 and 15-B, IRS guidance on the One Big Beautiful Bill Act, and FTB Schedule CA (540) instructions and conformity guidance. General information, not advice for your situation.