Business Meals and Entertainment Deduction Rules (2025)

By Yarik Yarosh, CPA ·September 5, 2026 ·6 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

The business meals deduction is one of the most commonly misunderstood and most frequently audited deductions for small business owners. As of 2025, business meals are 50% deductible under IRC 274. The temporary 100% deduction for restaurant meals (2021-2022) has expired. Entertainment expenses (sporting events, concerts, golf outings, club memberships) remain 0% deductible, a change made permanent by the Tax Cuts and Jobs Act. The IRS requires that the meal have a clear business purpose (a discussion of business directly before, during, or after the meal), and the taxpayer or an employee must be present. Simply eating alone while working is not enough to claim the deduction; the meal must involve a business discussion with a client, prospect, vendor, or business associate.

✓Key takeaway

Business meals and entertainment deduction rules (2025):

50% deductible (business meals):

Meals with a client, prospect, vendor, or business associate where business is discussed
Meals while traveling away from home overnight for business
Meals provided to employees for the convenience of the employer (on-premises)
De minimis meals for employees (break room snacks, coffee, occasional meals)
Meals at a business meeting or seminar
Meals during business travel (per diem or actual cost, subject to substantiation)

0% deductible (entertainment, since 2018):

Sporting events (tickets, suites, boxes)
Concerts, theater, shows
Golf outings, country club fees
Hunting, fishing, vacation trips
Club memberships (social, athletic, sporting)
Exception: if meals are separately stated on the bill at an entertainment event, the meal portion is 50% deductible

100% deductible (special categories):

Company-wide holiday parties, picnics, summer outings (for all employees)
Food and beverages provided as compensation to employees included in their W-2 wages
Food sold to customers (restaurant, food truck, catering)
Meals included in charitable fundraising events (the charitable contribution portion is separately deductible)

Substantiation requirements (the Cohan rule is NOT enough): The IRS requires contemporaneous records for EVERY meal deduction:

Amount
Date and time
Place (name and location of restaurant/establishment)
Business purpose (what was discussed)
Business relationship (name and title of the person you ate with)

A credit card statement alone is NOT sufficient (no business purpose or attendee information)
Best practice: note the business purpose and attendees on the receipt at the time of the meal

Common mistakes:

Claiming 100% deduction (expired after 2022)
Deducting entertainment (eliminated by TCJA)
Deducting meals eaten alone without business travel (not deductible)
Failing to document the business purpose and attendees
Deducting lavish or extravagant meals (not deductible)
Treating the entertainment portion of a combined meal/entertainment event as deductible

How does the meals deduction work in practice?

Hypothetical example

Round numbers. A consulting firm owner. Annual meals and entertainment spending: $12,000.

Breakdown of $12,000 in spending:

Category	Annual Spend	Deductible %	Deduction
Client lunches/dinners (business discussed)	$6,000	50%	$3,000
Meals while traveling for business	$2,000	50%	$1,000
Sporting event tickets (client entertainment)	$2,000	0%	$0
Team holiday party	$1,000	100%	$1,000
Break room snacks and coffee	$1,000	50%	$500
Total	$12,000		$5,500

Tax savings: $5,500 x 33% = $1,815/year

The sporting event workaround: The $2,000 in sporting event tickets is 0% deductible. But if the owner takes a client to a game and buys food and drinks separately:

Tickets: $400 (0% deductible, entertainment)
Hot dogs, beer, snacks at the game: $100 (this is the tricky part)
The IRS says: if the food is purchased separately from the entertainment AND is on a separate receipt, the food MAY be 50% deductible
But the food must be reasonable, not lavish, and have a clear business purpose
In practice: the $100 in food at the game could be 50% deductible ($50), while the $400 in tickets is $0
Best practice: always get separate receipts for food at entertainment events

The travel meal per diem option: Instead of tracking actual meal costs while traveling, the owner can use the federal per diem rate:

The standard CONUS per diem for meals and incidental expenses (M&IE) is $59-$79/day (varies by location; high-cost cities are higher)
The owner deducts 50% of the per diem rate
No need to keep individual meal receipts while traveling (just prove the travel was business-related)
Example: 20 travel days x $69 average M&IE = $1,380 (deduct 50% = $690)
This may be MORE than actual meal spending (especially for frugal travelers)
Available to self-employed individuals (employees use actual expenses for unreimbursed meals)

Meals with employees:

Situation	Deductible %
Team lunch to discuss a project	50%
Office snacks/coffee (daily, for all)	50%
Company holiday party	100%
Company summer picnic	100%
Meals provided on-premises for convenience of employer (working late)	50%
Overtime meals (required by union or policy)	50%
Meals included in employee W-2 compensation	100%

The “directly before, during, or after” rule: The business discussion doesn’t have to happen AT the meal. It can happen directly before or directly after. If a client meeting runs from 2-4 PM and the owner takes the client to dinner at 6 PM to continue the relationship, the dinner is 50% deductible. But if the “business discussion” was three days ago and the dinner is purely social, it’s not deductible.

Record-keeping system (avoid audit problems): The simplest system:

Use a dedicated business credit card for ALL business meals
Take a photo of every receipt (apps like Dext, Expensify, or just the phone camera)
On the back of the receipt (or in the app), note:
- Who you ate with (name, company, title)
- What business was discussed (one sentence: “discussed Q4 project scope”)
At month-end: categorize into 50%, 100%, or 0% deductible
Annually: total each category for Schedule C or S-Corp return

Sole proprietor eating alone: A sole proprietor who eats lunch at their desk while working: NOT deductible (no business associate present, not traveling). A sole proprietor who buys lunch while at a client’s location (traveling to a temporary work location): 50% deductible IF the location is far enough from their tax home that they wouldn’t normally eat there.

The distinction matters for trade businesses: a plumber who buys lunch every day between jobs is NOT deducting business meals. A plumber who travels to a job site 100 miles away and eats lunch there IS potentially deducting a travel meal (50%).

Illustrative numbers only, not a real client and not advice for your facts.

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Cite this page

Yarik Yarosh, CPA. "Business Meals and Entertainment Deduction Rules (2025)." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-meals-entertainment-deduction-rules-2025

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.