Tax insight

New rules limiting employer deductions for certain meals become effective in 2026

Insight
5 minute read
September 08, 2025

What happened?

Beginning in 2026, Section 274(o) will disallow 100% of employer expenses for providing (1) meals for the convenience of the employer or (2) meals in company cafeterias. The “One Big Beautiful Bill Act” (the Act) modified Section 274(o) to create limited exceptions to this disallowance provision by allowing deductions for the cost of certain meals provided to employees by restaurants and other establishments and by fishing vessels and certain fish processing facilities.

Why is it relevant?

Due to the delayed effective date of January 1, 2026, many companies may not have considered how the changes made to Section 274(o) by the 2017 Tax Cuts and Jobs Act (TCJA) will affect their deductions associated with certain employer-provided meals or subsidized company cafeterias, whether operated by the employer or a third party. 

Actions to consider

Taxpayers should consider the impact of the newly effective disallowance for expenses paid or incurred after December 31, 2025, and whether any of the new exceptions introduced by the Act might apply. Furthermore, taxpayers should monitor developments in Treasury and IRS guidance.