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Melissa A Schiff, CPA, PC
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Tax Deductions for Employee Meals
Business or work-related expenses can take up a big part of the budget for both employers and
employees. Fortunately, the federal tax code gives some tax benefits for various business
expenses. The tax deduction for employee meals is one of the most important and frequently
used tax benefits.
Both employees and employers can see significant tax savings from employer-provided meals.
Generally, as an employer, you get a tax deduction and your employees get tax-free meals. Not
all meals get the tax benefit, though. There are detailed rules about what expenses qualify for this
favored tax treatment.
Tax Benefit
Generally, just about anything you give your employees as "compensation" for their work is
income under the tax code. Wages or salary, of course, are included as income, but so are things
like fringe benefits and commissions. Likewise, the value of meals you provide for your
employees normally would be treated as gross income to them.
However, there's an exception for certain meals. If they qualify:
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You can take a tax deduction for the full value of meals you provide to your workers, and
The value of the meals aren't included in your employees' gross income
What Qualifies?
To qualify for the tax deduction, meals have to be:
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Provided on the business premises, and
For convenience of the employer
On the business premises generally means the location where your employees work. It can also
mean an eating facility that you run, like a cafeteria or lunch hall. An "employer-operated eating
facility" must:
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Be owned or leased by your business
Be operated by you directly, such as by your own workers, or by a third party under a
contract, such as a caterer
Be on or near your business premises
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Provide food and drinks during, or immediately before or after, the workday
For the convenience of the employer generally means that you have a reason for providing free
meals, and the reason isn't related to the worker's pay or salary. For instance:
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Making sure workers are available for emergency calls during a meal break
The nature of your business makes it necessary to limit meal periods to a short period of
time, like 30-45 minutes, and workers can't eat somewhere else in such a short time
When employees can't otherwise eat proper meals within a reasonable period of time,
such as when there aren't many restaurants near the business
If these requirements are met, you can take a deduction for the value of all meals provided to
your workers, and the value of the meals isn't included in your employees' gross income.
For example:
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Hospital employees are on call 24 hours a day to provide medical treatment. The hospital
requires them to take meals at the hospital free of charge. The meals are provided by the
employer for the employer's convenience because it's necessary for the employees to
present for emergencies and ongoing treatment of patients. So, the hospital can deduct the
value of the meals and the value isn't included in the employees' gross incomes
A bank teller who works from 9 a.m. to 5 p.m. is given a free lunch in a cafeteria that's
run by the bank on its premises. The bank provides meals in order to limit the teller's
lunch period to 30 minutes, since the bank is busiest during the normal lunch period. If
the teller had to get lunch elsewhere, it would take much longer than 30 minutes, and the
bank strictly enforces the 30 minute limit. The meals qualify because the bank's business
makes it necessary to restrict the teller's lunch to a shorter period, and the teller can't eat
elsewhere in the allotted time
De Minimis Meals
You can take a deduction for any meal you provide to an employee if it has so little value that
accounting for it would be unreasonable or impracticable. Examples of de minimis meals
include:
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Coffee, doughnuts, or soft drinks
Occasional meals or meal money that enable an employee to work overtime
Occasional parties or picnics for employees and their family and guests
Some Special Cases
There are a number of instances where the deduction does and doesn't apply. For example, if you
provide meals to an employee on her days off work, you can't deduct the value of the meals and
the value must be included her gross income. This rule doesn't apply, though, if the meals are
furnished with lodging that qualifies for the same tax treatment as qualified employer-paid
meals.
Also, if you own a restaurant, the deduction applies if you give a worker meals during, or
immediately before or after, his working hours. For example, if a waiter works through the
breakfast and lunch periods, you can exclude from his wages the value of the breakfast and lunch
you furnish in your restaurant for each day he works.
According to the IRS, giving an employee groceries, such as a grocery allowance, doesn't qualify
for the deduction. However, there are court decisions that say otherwise. So, you should talk to
your tax lawyer or other tax professional before you deduct these expenses.
Questions for Your Attorney
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Is there a limit or cap on how much I can deduct for qualifying meals I provide for my
employees?
What can I do if I provide meals for all of my employees but only some of them take
advantage of it?
Is there any tax benefit if I hire and pay my own workers to run a cafeteria in my office
building? Is there a benefit for hiring a caterer to run it?