Meals and Entertainment Deductions in 2026: What the One Big Beautiful Bill Actually Changed

The One Big Beautiful Bill, signed into law on July 4, 2025, made changes to Section 274 of the Internal Revenue Code — the section that governs meals and entertainment deductions. For most Houston businesses, the most significant change in 2026 is not a new benefit. It is a takeaway.

Houston employers who provide on-site meals, a stocked break room, catered working lunches, or a company cafeteria lose a deduction they have had since at least 2018. Restaurants and food service businesses have a specific exception that keeps their deduction intact.

Tax figures and law references are current as of June 2026. Tax rules are complex and fact-specific; we review this content quarterly. EZQ Group’s accounting team works with licensed CPAs on situations requiring CPA-level expertise. Always consult a qualified tax professional before making deduction decisions for your specific business.

What Section 274(o) Actually Changed in 2026

Section 274(o) of the Internal Revenue Code was amended by the One Big Beautiful Bill. The change applies to tax years beginning after December 31, 2025 — meaning your 2026 tax year.

What changed: employer expenses for three categories of meals that were 50% deductible under the TCJA (2018–2025) are now 0% deductible starting in 2026.

Those three categories:

1. Meals provided for the convenience of the employer — working lunches provided on-site so employees stay at their desks, meals provided because the employer’s remote location makes going out impractical, or meals provided to limit employee meal breaks.
2. Meals at employer-operated eating facilities and company cafeterias — if your company runs a cafeteria or dedicated eating space for employees, the cost of food and operations there is no longer deductible.
3. De-minimis food and beverages — snacks in the break room, coffee and beverages provided at no charge to employees, overtime meals provided on-site. These were previously 50% deductible. Starting 2026, they are not deductible at all.

This is a direct cost increase for Houston employers who have been claiming these deductions. If your monthly P&L includes a line item for office meals, catering, or employee food provisions, that deduction disappears for 2026 forward.

The Before/After Table

Here is how the key categories stand under Section 274(o) for 2026.

Expense Type	Before OBBBA — TCJA (2018–2025)	Under OBBBA (2026+)
Client business meals (taxpayer present, business discussed)	50% deductible	50% deductible — unchanged
Employee meals for convenience of employer	50% deductible	0% — disallowed
Company cafeteria / employer-operated eating facility	50% deductible	0% — disallowed
De-minimis food: snacks, coffee, on-site overtime meals	50% deductible	0% — disallowed
Holiday parties and company-wide social events	100% deductible	100% deductible — unchanged
Meals provided to the public (promotional)	100% deductible	100% deductible — unchanged
Meals while traveling overnight on business	50% deductible	50% deductible — unchanged
Entertainment (golf, sports events, concerts)	0% — nondeductible	0% — still nondeductible

The restaurant exception: Establishments that sell food and beverages to customers and also provide meals to their own employees are exempt from the 274(o) disallowance. A Houston restaurant or food service operation can still deduct the cost of employee meals it provides — because the same facility serves paying customers. This is a meaningful carve-out for Houston’s large restaurant and hospitality sector.

Who This Hits in Houston

The 274(o) change affects any Houston employer who has been deducting employee meal expenses on the following basis:

• Office kitchens stocked with food and beverages for staff
• Catered working lunches or team meals at the office
• Employer-run cafeterias or dining facilities
• On-site snack programs, coffee service, or break room provisions
• Overtime meals provided to employees working late on-site

If your business provides any of these and has been deducting them, that deduction is gone for tax year 2026.

For Houston restaurants, food trucks, catering companies, and hospitality businesses that sell food to the public — the restaurant exception applies. You can still deduct employee meal expenses. Review with your accountant to confirm your business structure qualifies for the exception.

What is not affected by 274(o):

• Standard client and prospect business meals where business is discussed (still 50%)
• Entertainment expenses (still 0% — no change from TCJA)
• Holiday parties and company-wide social events (still 100%)
• Meals while traveling overnight on business (still 50%)

The Four Documentation Items You Need for Any Meal Deduction

Whether a meal is 50% deductible (client meals) or fully deductible (holiday party), you need the same core documentation. Missing any one of these items is how the IRS disallows the deduction entirely.

1. Date. When did the meal occur? This appears on the receipt, but you should also have it in your expense tracking system.

2. Amount. The total cost including tax and tip. A receipt covers this. A credit card statement alone does not — it shows the restaurant total but not the tip, and may not show the itemized breakdown if your documentation is ever questioned.

3. Business purpose. What was the business reason for the meal? “Lunch with client” is not a business purpose. “Reviewed Q2 scope of services for ABC Construction’s bookkeeping engagement” is a business purpose. The purpose needs to be specific enough that someone who was not there could understand why the meal was a business expense.

4. Attendees and their business relationship. Who was there? What is their connection to your business? “John Smith, CEO of ABC Construction, bookkeeping client” is sufficient. “Client” is not.

A receipt from the restaurant plus a note in your expense system — capturing purpose and attendees — meets the requirement. A credit card statement alone does not.

For Houston businesses running dozens of meal expenses per month (restaurants, real estate, consulting firms), this means building a capture habit rather than reconstructing records at tax time. See our guide to organizing receipts for your small business for a practical system.

Common Mistakes Houston Business Owners Make on Meal Deductions

Our accounting team sees these same patterns repeatedly when reviewing new clients’ books.

Mistake 1: Continuing to deduct convenience meals in 2026. The 50%-deductible employer convenience meal category that existed from 2018 through 2025 is gone for 2026. Continuing to deduct break room food, catered office lunches, and on-site overtime meals will trigger corrections on filing or examination.

Mistake 2: Claiming personal meals as business meals. A solo business owner who eats at a restaurant while reviewing emails is not having a business meal. There is no client, no prospect, no business discussion. The meal is personal. This is the most common audit trigger in the meals category.

Mistake 3: Calling entertainment “meals.” A Houston Texans suite that includes catering is not a deductible meal. The entertainment component — the game — is what drives the invitation. If food and beverages are provided at an entertainment event, they may be separately deductible if they are separately invoiced and documented. Bundled together, the whole thing is nondeductible.

Mistake 4: Missing the attendee documentation. The business purpose is recorded; the attendees are not. Without a record of who was at the meal and their business relationship, the IRS can and does disallow the deduction.

Mistake 5: Claiming meals for family members. If your spouse joins a client dinner, only the business attendees’ portions are deductible. The personal portion — what was spent on family members not involved in the business discussion — is not.

What Is Still Not Deductible

The following remain nondeductible regardless of the OBBBA changes:

• Entertainment. Golf, sporting events, concerts, theater, and similar activities. Even with business discussion. Even with clients. The Section 274(a) entertainment disallowance still stands.
• Club memberships. Country clubs, athletic clubs, airline clubs, hotel clubs. Membership dues are not deductible even if you use the club for business meetings.
• Personal meals. Meals you eat alone during a normal workday at or near your usual place of business. Traveling overnight on business is different — those meals are deductible at 50%.
• Lavish or extravagant meals. There is no bright-line dollar limit, but the IRS can challenge deductions where the expense is unreasonable relative to the business purpose.
• Meals with no business discussion. A social lunch with a client where no business was discussed is not a business meal. Friendships with clients do not make personal meals deductible.

How to Track Meal Expenses in QuickBooks

The most practical way to protect your meal deductions is to build the documentation habit into your expense entry workflow rather than reconstructing it at year-end.

Step 1: Photograph the receipt immediately. Use the QuickBooks mobile app to capture the receipt while you are at the restaurant. Do not wait until the end of the day.

Step 2: Write the purpose and attendees in the memo field. In QuickBooks, every transaction has a memo or description field. Use it. “Lunch — discussed Q3 services renewal with Jane Park, CFO at Meridian Group” takes 15 seconds to type. That note is your documentation if the IRS asks.

Step 3: Use separate expense categories. Set up distinct expense accounts in your chart of accounts: one for 50%-deductible client business meals, one for 100%-deductible company events (holiday party, etc.), and one for meals that are no longer deductible under 274(o). Keeping them separate makes year-end tax preparation significantly cleaner. Ask your bookkeeper which account structure they prefer given your volume.

For the full context on what changed in the One Big Beautiful Bill and how it affects your business broadly, see our OBBBA final law update. For a complete checklist of small business deductions beyond meals, see the small business tax deductions checklist.

Related reading:

• What Can I Deduct on My Taxes? The Small Business Edition
• The One Big Beautiful Bill Is Now Law: What Changed for Businesses and Individuals
• Receipt Organization: Stop Losing Tax Deductions in Your Glove Box

Frequently Asked Questions

Can I still deduct employee meals in 2026?

Generally no — with a key exception. Under Section 274(o), employer expenses for meals provided for the convenience of the employer, company cafeteria meals, and de-minimis food and beverages (snacks, coffee, on-site overtime meals) are now 0% deductible starting in 2026. The exception: businesses in the restaurant and food service industry that sell food to the public can still deduct meals they provide their own employees. If you operate a restaurant, that deduction survives. If you run an office and provide a stocked kitchen or catered lunches, that deduction is gone for 2026 forward.

Are client business meals still 50% deductible in 2026?

Yes. Ordinary business meals with clients, prospects, or business partners — where the taxpayer or an employee is present, business is discussed, and the meal is not lavish or extravagant — remain 50% deductible. The OBBBA Section 274(o) change targeted employer convenience meals, not client business meals. The standard 50% rule for client meals is unchanged.

Does the 50% rule still apply to meals in 2026?

Yes, for client and business-purpose meals. The 50% limitation under Section 274 still applies to ordinary business meals where business is discussed. What changed under the OBBBA is that employer-provided convenience meals, cafeteria meals, and de-minimis food items that were 50% deductible under TCJA are now 0% deductible starting in 2026. Entertainment remains 100% nondeductible, unchanged from TCJA.

Can I deduct my lunch every day?

Generally no. A meal you buy for yourself while working is not deductible as a business meal. The meal must serve a bona fide business purpose beyond simply eating while working. Some exceptions exist for meals while traveling overnight on business, but your daily lunch at your office or usual place of business is personal, not deductible.

What about taking a client to golf in 2026?

Golf and entertainment expenses remain nondeductible. The OBBBA did not restore entertainment deductibility. Golf, sporting events, concerts, and similar activities are still not deductible even if business is discussed. Food and beverages consumed at an entertainment event may be deductible separately if itemized on a separate receipt — but the entertainment itself is not.

Is a credit card statement enough documentation for a meal deduction?

No. A credit card statement shows the amount and the vendor, but it does not establish the business purpose or who attended. The IRS requires four pieces of documentation: the date, the amount, the business purpose, and the names of attendees and their business relationship. A receipt plus a note documenting purpose and attendees is the minimum.

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Questions about meal deductions or what your Houston business can write off in 2026? Our accounting team works with licensed CPAs on situations that call for CPA-level expertise. Call us at (346) 389-5215 or schedule a consultation.