Business Meal & Entertainment Deductions in 2025–2026

What Business Owners in Los Angeles Need to Know

The rules for deducting business meals and entertainment have changed significantly over the past several years. Many business owners — especially doctors, dentists, creators, and e-commerce founders — still assume expenses are deductible that are no longer allowed.

With additional limitations taking effect in 2026 under the One Big Beautiful Bill Act (OBBBA), proper classification and documentation are more important than ever.

At Velin & Associates, Inc., CPA Los Angeles, we regularly review meal and entertainment expenses for medical practices, online businesses, Amazon sellers, YouTubers, and high-income professionals. Below is a clear, updated breakdown of what is deductible in 2025 and what changes beginning in 2026.

1. Entertainment Expenses: Generally Not Deductible

Since 2018 (Tax Cuts and Jobs Act), most business-related entertainment expenses are not deductible.

This includes:

• Sporting events

• Concert tickets

• Theater shows

• Golf outings

• Client entertainment events

Example – E-Commerce Business Owner

A Shopify store owner takes a supplier to a Lakers game to discuss expansion opportunities.
Even though business was discussed, the ticket cost is not deductible.

The OBBBA did not change this rule.

Exceptions: When Entertainment Is 100% Deductible

Certain entertainment costs remain fully deductible if they meet specific criteria:

• Reported as taxable compensation to employees (included on W-2)

• Reported as income to nonemployees (1099)

• Sold to customers at fair value

• Made available to the general public

• Employee events open to all staff (not just management)

Example – Dental Practice

A dental practice hosts a holiday party for all employees.
Because the event is open to the entire staff, the cost is 100% deductible.

However, if the party is only for partners or management, the deduction may be limited.

2. Business Meals: Generally 50% Deductible

The tax code uses the term “food and beverage costs” broadly. It includes:

• Meals

• Snacks

• Coffee

• Alcohol

• Sales tax

• Delivery fees

• Tips

In most situations, these costs are 50% deductible.

The Three Requirements for Meal Deductions

To deduct 50% of a business meal, all three conditions must be met:

1. The expense is not lavish or extravagant.

2. The taxpayer (or an employee) is present.

3. The meal is provided to a business associate.

A business associate may include:

• Customer

• Prospective client

• Vendor

• Supplier

• Employee

• Agent

• Partner

• Professional advisor

Example – CPA for Doctors Scenario

A physician meets with a medical equipment supplier over dinner to negotiate pricing.
The doctor attends the dinner and maintains proper documentation.

Result: 50% of the meal is deductible.

Example – CPA for Creators Scenario

A YouTuber meets a brand sponsor at a restaurant to negotiate a long-term partnership.

Result: 50% deductible, assuming documentation is maintained.

Travel Meals

If you travel overnight away from your tax home for business:

• Your meals are generally 50% deductible.

• They must not be lavish.

• Proper records must be kept.

This frequently applies to:

• Filmmakers traveling for production

• Medical professionals attending conferences

• Amazon sellers attending trade expos

• Creators attending brand events

Meals Connected to Entertainment

If food is purchased at a sporting event or entertainment venue:

• It is still 50% deductible

• Only if purchased separately OR separately stated on the invoice

If bundled into the ticket price, it is not deductible.

Detailed receipts are essential.

Employer-Provided Meals (On-Site Meals)

Currently (2025):

Meals provided on business premises for the employer’s convenience are 50% deductible.

This includes:

• Company cafeterias

• Staff lunches for operational reasons

• Meals provided during extended shifts

Major Change Effective January 1, 2026

Beginning in 2026:

Employer-provided meals for the employer’s convenience (including on-site cafeterias and de minimis fringe meals like office snacks) will generally become non-deductible.

This was originally scheduled under prior law and confirmed under OBBBA.

Who Will Be Affected Most?

• Medical practices providing regular staff meals

• Dental practices offering in-office catering

• Production studios providing crew meals

• Tech and e-commerce companies offering routine on-site meals

• High-growth startups in Los Angeles

Planning should begin in 2025 if these costs are significant.

Exceptions to the 50% Rule (100% Deductible Meals)

You may deduct 100% of meal costs if:

• Provided at employee parties open to all employees

• Reported as taxable compensation

• Sold at fair market value

• Made available to the public

Example – Retail Store

A Los Angeles boutique provides complimentary coffee and snacks for customers.

Result: 100% deductible.

What Is NOT Deductible

• Meals for spouses or companions during business travel (unless they are bona fide employees with legitimate business purpose)

• Lavish or extravagant meals

• Entertainment bundled with meals (if not separately stated)

• Most client entertainment events

Documentation Requirements

The IRS requires adequate substantiation, including:

• Amount

• Date

• Place

• Business purpose

• Business relationship of attendees

For our clients — CPA for Medical Practice, CPA for Dental Practice, CPA for Online Commerce — we recommend:

• Using accounting software that categorizes meals separately

• Uploading receipts in real time

• Keeping notes on the business purpose

Poor documentation can result in full disallowance during audit.

Strategic Considerations for 2025–2026

Because employer-provided meals become nondeductible in 2026:

• Businesses that routinely provide staff meals should evaluate cost structure.

• Owners may consider adjusting compensation structures instead.

• Budget projections for 2026 should reflect reduced deductions.

For high-income professionals and fast-growing businesses, this change can mean thousands of dollars in lost deductions annually.

Why This Matters for Los Angeles Business Owners

We regularly see confusion among:

• CPA for YouTubers

• CPA for Shopify Store owners

• CPA for Amazon Business sellers

• CPA for TikTokers

• CPA for Doctors

• Dentist CPA clients

• CPA for Filmmakers

• CPA for High Net Worth Individuals

Meal deductions are one of the most commonly misclassified expenses.

Incorrect classification between:

• Meals (50%)

• Employee events (100%)

• Entertainment (0%)

can significantly impact tax liability.

Final Thoughts

The core rules for 2025 remain mostly unchanged:

• Entertainment is generally not deductible.

• Business meals are typically 50% deductible.

• Employee-wide events may be 100% deductible.

However, beginning in 2026, employer-provided meals for convenience will generally become nondeductible.

This is an important planning consideration for medical practices, creative studios, and growing e-commerce businesses.

If you operate a business in Los Angeles and want to ensure your deductions are structured properly and audit-ready, we can help. For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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