Business Meal Deduction: The 50% Rule and What Qualifies

The rule in one paragraph

You can deduct 50% of the cost of a business meal if you or your employee are present and the food and drinks are not lavish or extravagant under the circumstances. The meal can be with a current or potential customer, client, consultant or similar business contact. Publication 463 adds that a meal is not lavish just because it is expensive or at a nice restaurant; the test is whether it is reasonable.

The 50% applies to the whole cost of the meal. Taxes and tips are part of that cost, so they are limited too. Getting there and back is not: transportation to and from the meal is a separate expense.

A client lunch of $86.00 with $7.31 tax and a $17.20 tip costs $110.51. The deduction is $55.26.

Why you may remember 100%

For 2021 and 2022 only, businesses could generally deduct the full cost of food and drinks bought from a restaurant. The IRS defined a restaurant as a business that prepares and sells food or drinks to retail customers for immediate eating, and excluded grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods. That temporary rule is over, and Publication 463 for 2025 returns states the 50% limit.

What gets 50%, 100% or nothing

Entertainment is the big exclusion. Publication 463 says you generally cannot deduct any expense for an entertainment event, such as a nightclub, a sporting event or a vacation trip. Food and drinks are not treated as entertainment if they are bought separately from it or listed separately on the bill. Examples with stated prices:

The two 100% rows come from the exceptions to the 50% limit. Publication 463 lists six:

• Meals or entertainment treated as compensation and reported as taxable wages to an employee.
• Employee expenses you reimburse under an accountable plan.
• Expenses of a self-employed person that a client reimburses, when you give the client adequate records.
• Recreational expenses for employees, such as a holiday party.
• Meals given to the public as advertising or goodwill.
• Meals sold to the public, for example by a restaurant.

Some transport workers get a higher share. For meals while away from home during work subject to the Department of Transportation hours of service limits, such as interstate truck drivers, certain pilots, railroad workers and merchant mariners, the percentage is 80%.

Meals on business travel

The same limit applies on the road. Whether you add up actual meal receipts or use the standard meal allowance, you can generally deduct only 50% of unreimbursed meal costs. The standard meal allowance is the federal rate for meals and incidental expenses (M&IE). Publication 463 gives $68 a day as the standard M&IE rate in the continental US for fiscal year 2026; locality rates for cities are on GSA.gov and can change during the year.

Using the allowance does not remove the need to prove the time, place and business purpose of the trip. Driving to meetings is a car expense, not a meal cost; the mileage reimbursement calculator works out the mileage side.

What it adds up to over a year

Say you take a client or prospect out 2 times a month at an example average of $64 including tax and tip. That is $1,536 a year and a deduction of $768. The deduction lowers your business profit. If you are self-employed, profit is also what self-employment tax is figured on, and the self-employment tax calculator shows how a lower net profit changes it. Neither number is a tax saving of the same size: the deduction reduces taxable profit, and the saving depends on your own rates.

The records the IRS asks for

You generally need documentary evidence, such as receipts, canceled checks or bills, for any expense other than lodging of $75 or more. Below $75 a receipt is not required, but you still need a record of the amount, date, place and purpose, and a receipt is the easiest proof. Publication 463 says a restaurant receipt is enough to support the cost if it shows:

• the name and location of the restaurant,
• the number of people served,
• the date and the amount of the expense,
• and, if it includes charges other than food and drinks, what those were.

Add a note on the business purpose and who you met; the receipt alone does not say why the meal was business. Keep the records for at least 3 years from the date you file the return, the general IRS period; how long to keep tax records lists the longer cases.

The 2026 change for employer meals

Publication 15-B for 2026 says that for amounts paid or incurred after 2025, an employer can no longer deduct the cost of food and drinks provided to employees through an eating facility that meets the de minimis fringe benefit rules. Through 2025 that was 50% deductible. The change was scheduled by the 2017 Tax Cuts and Jobs Act. It concerns on-site cafeterias and similar facilities for employees, not a meal with a client.

Quick check before you claim a meal

• Were you or your employee there?
• Was it with a customer, client or other business contact, for a business reason?
• Was the cost reasonable, not lavish?
• If there was entertainment, is the food on its own bill or line?
• Do you have a receipt with the place, date, amount and number of people, and a note of the purpose?

If it is a mixed case, such as a dinner that is partly social, the rules in Publication 463 or a tax professional are the place to check. See also the home office deduction and tax deduction vs tax credit.

Frequently asked questions

Sources

• IRS, Publication 463 (2025), Travel, Gift, and Car Expenses, chapter 2 (50% limit; you or an employee present; not lavish; entertainment not deductible; food bought separately; taxes and tips included; the six exceptions; 80% for DOT hours of service)
• IRS, Publication 463 (2025), chapters 1 and 5 (standard meal allowance is the federal M&IE rate; documentary evidence for expenses of $75 or more; what a restaurant receipt shows; keep records 3 years)
• IRS, Tax Tip 2022-91, enhanced business meal deduction (100% for restaurant meals in 2021 and 2022 only)
• IRS, Publication 15-B (2026), What's New (employer eating facility meals not deductible for amounts paid or incurred after 2025)

General information based on the sources above, not tax, legal or financial advice.

Written by Tobias. Updated October 30, 2026.