Business meals deduction: the 50% rule

When you pay for a meal for your business, you can usually deduct part of the cost from your business income. This is the business meals deduction.

Most business meals are 50% deductible. A few are 100% deductible. Entertainment, such as a ballgame or a round of golf, is not deductible at all. The hard part is to know which group a meal is in, and to keep a short note that proves it.

The short version

• You can usually deduct 50% of a business meal (Schedule C instructions).
• A meal with a client counts only if you or your employee is there, it is not lavish, and the other person is a business contact.
• Your own meals count only on an overnight business trip away from home.
• A few costs are 100% deductible, such as a holiday party for your staff or free food for the public (Publication 463).
• Entertainment is not deductible, even if you talk business the whole time.
• Keep a record of who was there and why.

Words to know

• Business contact: a current or possible client, customer, consultant, or similar business person.
• Lavish: more than is reasonable for the situation. A meal is not lavish only because it costs a lot or is at a good restaurant.
• Away from home: you travel away from the area of your tax home for longer than a normal work day, and you need sleep or rest. A day trip does not count.

When a meal is a business meal

The Schedule C instructions for line 24b give these conditions:

1. The meal is an ordinary and necessary cost of your business.
2. It is not lavish or extravagant.
3. You or your employee is at the meal.
4. The meal is for a current or possible customer, client, consultant, or similar business contact.

Your own meals on an overnight business trip also count. Your lunch alone near your home office is personal, even if you work through it.

What the 50% includes

Tax and tip are part of the meal, so they are 50% too. The taxi or parking to get to the meal is not part of the meal, so the 50% limit does not apply to it (Publication 463).

The temporary 100% deduction for restaurant meals is over. It applied only to amounts paid before January 1, 2023 (26 U.S.C. 274(n)). Some older articles still mention it.

The 100% exceptions

Publication 463 lists the exceptions to the 50% limit. For a small business, these are the usual ones:

• Parties and picnics for employees, such as a holiday party or a summer picnic.
• Food for the general public to advertise or build goodwill, such as free snacks at an open day.
• Meals you sell, such as the food a café sells.
• Meals a client pays you back for, if you give the client good records. Then the client takes the 50% limit.
• Meals given to an employee as pay and reported as wages.

If you have no employees, the employee exceptions do not apply to you.

Entertainment is out

You cannot deduct entertainment, even with a client. This includes sporting events, theaters, nightclubs, golf and club dues (Publication 463).

You can still deduct the food at an event if you buy it separately or the bill shows it separately. Publication 463 uses a baseball game as an example. The tickets are not deductible. Hot dogs and drinks bought separately at the game are 50% deductible. You cannot get around the rule by putting more of the cost on the food line.

Travel meals and the standard meal allowance

On an overnight business trip, you can deduct 50% of what you really spent on meals. Or you can use the standard meal allowance, a set daily amount for meals and incidental expenses. The amount depends on where and when you travel, and the GSA publishes the rates. Self-employed people can use it. The 50% limit still applies, and you must still keep records of the time, place and business purpose of the trip (Publication 463).

A change for employers in 2026

If you have employees, one more rule starts with amounts paid after December 31, 2025. Meals you give employees for your own convenience, and the costs of an on-site staff cafeteria, are generally no longer deductible (26 U.S.C. 274(o)). There are narrow exceptions, so ask a tax professional. Client meals, travel meals and the holiday party do not change.

An example

Leo is a freelance marketing consultant with no employees. (He is an example, not a real person.) Here is part of his 2026 spending:

Only $780 of the $2,760 is a deduction. Leo records the full cost of each meal in his books. The 50% cut happens on his tax return, on Schedule C line 24b.

The records you need

Publication 463 says a restaurant receipt is good proof if it shows the name and location of the restaurant, the number of people, and the date and amount. You must also generally write down the business purpose. A receipt does not show who was at the table or why, so write that down at the time. For example: “Lunch with Ana, owner of a bakery, to discuss the spring campaign.”

You do not need a receipt for an expense under $75, other than lodging. But you still need the written record. For more, see do I need to keep receipts and how to track business expenses for taxes.

A Righto tip

In Righto, give client meals and entertainment their own categories. Then entertainment is never counted as a meal by mistake. Import your bank statement (CSV, OFX or PDF), sort each restaurant charge, and add a note with the name and purpose. You can also ask your own AI agent, such as Claude Code, to list meals without a note. See how agents work with Righto.

Common questions

Can I deduct a meal with a friend if we talk about business? Only if the friend is a real business contact and the meal has a business purpose. A mainly social meal is personal.

Is my lunch deductible if I work through it? No, unless you are on an overnight business trip away from home.

Do I take off the 50% in my books? No. Record the full cost. The limit is applied on the tax return.

What to do now

1. Open last month’s card statement and find each restaurant charge.
2. Put each one in a group: business meal (50%), entertainment (0%), or personal.
3. For each business meal, write who was there and why.
4. Keep the receipts for meals of $75 or more.

Righto is free, easy to use and needs no account.

Sources

• Publication 463 (2025), Travel, Gift, and Car Expenses, IRS (chapter 2, Meals and Entertainment; chapter 5, Recordkeeping)
• Instructions for Schedule C (Form 1040) (2025), IRS (line 24b)
• 26 U.S. Code 274, Legal Information Institute, Cornell Law School (subsections (n) and (o))