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Proper classification of meal expenses can help businesses maximize deductions while staying compliant with IRS regulations. Here’s what business owners need to know:

1. 50% Deductible Meals

In general, 50% of business-related meal expenses can be deducted unless an exception applies (see 100% deductible, 80% deductible, and non-deductible meals below). To qualify, the meals must be provided to a current or potential business customer, client, consultant, or similar business contact. Common examples include:

• Business-related meals with clients or prospective clients.
• Meals while traveling for work.
• Meals at seminars or conferences.
• Food or beverages available to employees in a pantry, break room, or copy room.
• Employee meals consumed at a restaurant where less than half of the employees are present.

2. 100% Deductible Meals

Some business-related meals are fully deductible. Below are common exceptions where meals can be 100% deductible:

• Food or beverages provided for a recreational, social, or similar activity primarily for the benefit of employees (e.g., office holiday parties, company picnics).
• Food or beverages made available to the general public free of charge (e.g., promotional events, goodwill gestures).
• Food or beverages provided to employees when treated as compensation (see below).
• Expenses for the food a restaurant sells to its customers.

3. 80% Deductible Meals

Certain professions have an increased meal deduction threshold. Air transportation workers, interstate truck operators, bus drivers, railroad employees, and merchant mariners may be able to deduct 80% of their meal expenses while traveling away from their tax home. For details, refer to IRS Publication 463.

4. Non-Deductible Meals

Some meals will not qualify for a deduction, including:

• Expenses that are not ordinary (common in the industry) or not necessary (helpful and appropriate for the business).
• Meals that are lavish or extravagant under the circumstances.
• Meals where the taxpayer (or an employee) is not present.
• Meals purchased in conjunction with entertainment, where the cost of meals is not separately stated from the entertainment cost.
• Meals that have no business purpose.

When Do Meals Need to Be Added to Employee Compensation?

Meals are 100% deductible when the cost of the meal is included in an employee’s compensation. Generally, meals provided to employees must be included in their compensation unless an exclusion applies. Please refer to this publication for more details, scenarios and exceptions.

Exclusions (Meals Not Added to Employee Compensation, Deductible at 50%)

1. De minimis meals: If the meals are of minimal value and provided infrequently, making accounting for them unreasonable or administratively impracticable.
2. Meals at an employer-operated eating facility: If the facility’s annual revenue equals or exceeds direct operating costs.
3. Meals furnished on business premises: If meals are provided for the employer’s convenience.

Additional Resources

For more information, refer to the following IRS and tax resources:

1. Publication 15-B (2025), Employer’s Tax Guide to Fringe Benefits
2. IRS Publication 463 – Travel, Gift, and Car Expenses
3. CCH AnswerConnect

Navigating meal deductions correctly can help businesses optimize their tax filings and minimize unnecessary tax liability. If you have any questions or need assistance, feel free to reach out to Beaird Harris for guidance!