Restaurant Dining Deduction
Authored by: Doug Gross — Partner, CPA, CGMA | Updated On: December 16, 2025
No grass is greener, whichever side you’re on, when inflation clouds over every field.
Being in one economic setting, every business is experiencing blows of instability, though at varying levels and across different areas (production, supply, labor, etc.). The upside of this domino effect is that a single positive move can improve the situation and stimulate growth across industries.
Business meals have long been an important part of conducting business, whether you’re meeting with clients at a restaurant, traveling for work, or providing meals for your team. Understanding how these expenses are treated for tax purposes helps you make informed decisions and capture every deductible meal you’re entitled to. Currently, business meals from restaurants remain 50% deductible when they meet IRS requirements. The standard 50% deduction continues to apply for most business dining situations in 2025 and 2026.
With the ongoing tax filing season, accountants and business owners are preparing to dive into tax planning. Here are the main points about restaurant dining deductions that you should know and consider as you plan your taxes.
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Business Meals from Restaurants Are 50% Deductible in 2025 and 2026
Business meals purchased from restaurants are generally deductible at 50% when they meet IRS requirements. This applies to meals with clients or prospects, meals during business travel, and meals with a few employees where business is discussed. To qualify for the meal and entertainment tax deduction, the meal must meet specific criteria:
- It must not be lavish or extravagant under the circumstances.
- The owner, taxpayer, or an employee of the organization must be present.
- The food and/or beverage must be provided to a business associate (any person you could reasonably expect to engage or deal with in the active conduct of your business).
How Do You Determine Whether an Expense is Lavish or Extravagant?
There is no dollar limit for deductible meal expenditures. The best way to determine whether they are lavish or extravagant is to review each expenditure and use your sound judgment to assess whether the costs are reasonable and proportionate to the circumstances. You must properly document and substantiate your meal expenses regardless of cost.
"Restaurant" Has a Specific Definition.
Under IRS guidelines, the term “restaurant” shall be construed as a “business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises.” This definition includes both full-service restaurants and quick-service establishments.
The following are not considered “restaurants” for purposes of determining deductibility:
- Any eating facility located on the business premises of the employer, and used in furnishing meals, is excluded from an employee’s gross income; or
- Any employer-operated eating facility is treated as a de minimis fringe benefit, even if operated by a third party under contract with the employer.
Can You Deduct Delivery Fees, Tips, and Sales Tax?
Aside from the actual food and drink costs, you can also include delivery fees, tips, and sales tax in your claim for deduction at the same 50% percentage as the food business expense itself.
Does The Deduction Apply to The Meal Portion of Per Diem Rate or Allowance?
The benefit of using a per diem is that the employer does not have to demonstrate that the meals were purchased by their employees from a restaurant. Under IRS guidelines, a taxpayer who follows the per diem rules is deemed to have complied with the substantiation requirements for the meal portion.
Important Changes Coming in 2026
While business meals from restaurants will continue to be 50% deductible, there are important changes coming to other types of meal deductions that businesses should understand due to the One Big Beautiful Bill Act (OBBBA) signed in July 2025:
- Starting January 1, 2026, meals provided on the employer’s business premises for the employer’s convenience will be entirely non-deductible (0%). This affects employer-operated cafeterias and on-site meal programs.
- Additionally, meals and snacks that previously qualified as de minimis fringe benefits (like break room coffee, snacks, or donuts at staff meetings) will also become non-deductible (0%) in 2026.
The law does provide specific exceptions. For example, restaurant and catering businesses can continue to deduct the cost of meals provided to their kitchen staff, servers, and other employees who work in food service operations.
What Remains Deductible in 2026 and Beyond?
50% Deductible:
- Business meals with clients or prospects at restaurants where business is discussed.
- Meals consumed during business travel (when traveling away from home overnight).
- Meals with a few employees where business is conducted.
- Restaurant and catering employee meals (for those working in the food service industry).
100% Deductible:
- Company-wide events, such as holiday parties, annual picnics, or team celebrations, are available to all employees.
- Meals included as taxable employee compensation (reported on W-2).
- Food or beverages are provided free to the public for promotional purposes.
0% Deductible (Starting 2026):
- Meals are provided on the employer’s premises for the employer’s convenience.
- De minimis fringe benefits, such as break-room snacks and beverages.
- Entertainment expenses (concerts, sporting events, etc.), though separately stated meal costs at entertainment venues may still be 50% deductible.
Takeaway
Understanding the rules for restaurant dining deductions helps maintain sound financial operations in your organization. In addition, these deductions support inter-industry relationships that stimulate the economy. It is important for you to stay up to date with tax legislation and regulations. Don’t miss any available tax write-offs. Talk to an accountant and tax professional you can trust to get started!
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