ABL&Co. Tax & Accounting

Running a service-based business requires staying ahead of constant regulatory shifts. We want to make sure you are prepared for a change regarding meal deductions.

Starting January 1, 2026, expenses for employer-operated eating facilities and meals provided for the convenience of the employer become fully nondeductible under IRC Section 274(o).

This applies to all taxpayers, regardless of their fiscal year, as the disallowance is based on when the expense is paid or incurred.

Scope of Disallowance

• Employer-operated eating facilities: This includes cafeterias, kitchens, and any part of the facility used primarily for furnishing food or beverages to employees, defined under IRC Sec. 132(e)(2).

• Meals for convenience of employer: Covers meals provided when it’s impractical for employees to obtain food elsewhere due to business reasons (e.g., staying late, shift work, security) as described in IRC Sec. 119 and Reg. 1.119-1.

Key Changes and Preparation

• Total disallowance: All associated expenses (facility, food, beverages) are nondeductible regardless of whether meals are provided in a cafeteria or informally (such as pizza for late work).

• Effective date: Applies to all expenses paid or incurred after January 1, 2026, including mid-year and non-calendar fiscal year taxpayers.

• Next steps: Taxpayers should identify and track affected expenses, project tax impact, and monitor legislation or IRS guidance for updates.

Our team is here to help you navigate these shifts with clarity.

Benefits of proactive planning:

✅ Accurate tax projections

✅ Adjusted expense tracking

✅ Informed financial decisions

Reach out today to schedule a meeting to discuss how this change affects your specific business.