Meals and entertainment isn't one category. Code business meals to a 50% deductible meals account. Code entertainment, such as tickets and golf, to a separate nondeductible account. Keep the small set of 100% deductible meals, like the annual party, in its own account. Splitting them at the account level lets your tax preparer apply the right percentage.
Meals belong in a 50% deductible expense account. Entertainment belongs in a separate 0% deductible account. A small bucket of meals stays 100% deductible (holiday party or picnic for employees, food sold to customers, certain vessel and rig meals). Don't lump them together. Your tax preparer needs the split at the account level so the right percentage flows to the return. The full chart of accounts framework explains how these accounts fit alongside the rest.
The clean setup uses three accounts: Meals - 50% Deductible, Meals - 100% Deductible, and Entertainment - Nondeductible. Tagging inside one combined account works in theory. It falls apart at year-end when you're racing to reconcile and the tags don't match the GL totals.
Most business meals land here: a working lunch with a client, a coffee with a referral partner, and the steak dinner that closed the deal. Code the full bill (food and beverage, tax, and tip) to Meals - 50% Deductible. Don't pre-cut the amount. The tax software applies the §274(n) 50% limit at filing.
Example: a $187.40 client lunch with sales tax and a 20% tip goes in at $187.40. The deduction your business actually claims on the return is $93.70. The GL holds the full expense.
Tickets to a Mavericks game, a round of golf at the country club, a charter fishing trip with a prospect. None of it is deductible after TCJA. Code it to Entertainment - Nondeductible. Skipping the account and burying these in Meals overstates the deductible meals line with spend that isn't deductible at all.
If a client meal happens at a sporting event, split the receipt: food and drink to Meals - 50%, tickets to Entertainment - Nondeductible. Pub 463 lets you treat the food as a meal only if it was bought separately from the tickets or its cost is stated separately on the bill, invoice, or receipt. If the ticket price includes the food, all of it is entertainment.
A handful of items still hit 100%: the annual holiday party, an occasional picnic or social event primarily for employees, food sold to the public at FMV, and meals provided on certain vessels, oil and gas platforms, and drilling rigs. Employee meals got narrower in 2026 under §274(o). See the 2026 rules below before you treat anything as 100%.
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Get started with GrowthyThe 2026 change didn't come from the One Big Beautiful Bill Act (OBBBA). The 2017 Tax Cuts and Jobs Act (TCJA) added §274(o) and set it to apply to amounts paid or incurred after December 31, 2025. OBBBA (Pub. L. 119-21) then added limited exceptions to it. The 50% rule for normal client meals is unchanged. The 0% rule for entertainment is unchanged. The big change is what happens to the meals you used to provide your own employees.
Client meals, prospect meals, vendor meals, partner meals, and your own meals while traveling for business stay 50% deductible under IRC §274(n), as long as the meal isn't lavish and you or an employee is present (§274(k)). For travel meals, §274(d) requires records of the amount, the time and place, and the business purpose. For any expense of $75 or more (and all lodging), you also need documentary evidence such as a receipt (Treas. Reg. §1.274-5(c)(2)(iii)). The $75 line only decides when a receipt is required. You still record who attended and why.
This is the bucket that pulls the most volume in any service business. Say, for example, you're a bookkeeper coding 487 transactions a month for a 15-client book of business: this is where the bulk of your meals coding lives.
The 2017 TCJA killed the entertainment deduction. OBBBA didn't bring it back. A "club dues" line for a country club is also 0%. Clubs organized for business, pleasure, recreation, or social purposes are excluded by §274(a)(3). If a client wants to write off the golf membership, the answer is no.
The temporary 100% deduction for restaurant meals (§274(n)(2)(D), added by Pub. L. 116-260 for amounts paid after 2020) expired for amounts paid after December 31, 2022. Don't cite it. Articles still floating around the internet that say "100% for restaurants in 2026" are stale.
This is the change that's easiest to miss. For amounts paid or incurred after December 31, 2025, §274(o) denies the employer's deduction for meals described in §119(a), the "employer convenience" exclusion, and for food and beverages tied to an employer-operated eating facility under §132(e). The 2017 TCJA wrote this rule (Pub. L. 115-97 §13304(d)). OBBBA did not create it. Pub 15-B confirms the 50% deduction that applied through 2025 is gone. That covers meals furnished on your business premises for your convenience during work hours. None of it is deductible to the employer after 2025.
A few narrow exceptions apply, and OBBBA is where they come from. §274(o) now excepts expenses described in §274(e)(8), goods or services sold in a bona fide transaction for full value (such as meals sold to employees at fair market value), and §274(n)(2)(C): crew meals on certain commercial vessels, meals on offshore oil and gas platforms and drilling rigs, rigs north of 54 degrees latitude, and, new under OBBBA, fishing vessels and certain fish-processing facilities. Pub 15-B says OBBBA also created limited exceptions for meals provided by restaurants. If your client runs a restaurant, have the tax preparer confirm how employee shift meals are treated. Everyone else loses the line.
For S-Corps and small businesses with on-premise meal programs (the "stocked fridge," the catered lunch every Tuesday), this changes the categorization. Where those programs are employer-convenience meals or eating-facility food, what was 50% deductible through 2025 is 0% deductible for amounts paid after 2025.
The 100% deductible bucket survived 2026 but stayed narrow:
- Annual company holiday party or summer picnic primarily for employees other than 10%-or-more owners and highly compensated employees
- Not on this list: de minimis snacks, coffee, and donuts. Pub 15-B calls these de minimis meals. They were 50% deductible from 2018 through 2025, and food provided through an eating facility that meets the de minimis rules isn't deductible after 2025
- Meals sold to the public at FMV (a restaurant, food truck, or catering operation selling food in the ordinary course)
- Meals on vessels, offshore platforms, drilling rigs (§274(n)(2)(C), which OBBBA widened to fishing vessels)
- Recreational/social events for employees that meet the §274(e)(4) requirements
If a client wants to claim the annual party at 100%, document the date, attendee list, and that it was primarily for rank-and-file employees rather than owners and highly compensated staff. That ties the expense to the §274(e)(4) test.
Here are the three patterns you'll hit over and over while categorizing transactions for small business clients.
You see a $94.18 charge at a steakhouse on the business credit card. The note says "lunch with Kevin re: Q2 contract." This is the textbook 50% client meal. Code to Meals - 50% Deductible, capture the attendee and business purpose in the memo line, attach the receipt. If your client is using a receipt-capture app, the memo and receipt should already be linked.
§274(k) adds two conditions to any business meal: it can't be lavish or extravagant under the circumstances, and you (or an employee) must be present. Pub 463 says the guest can be a current or potential customer, client, consultant, or similar business contact. Document who was there and move on.
The catered office lunch that was 50% in 2025 as an employer-convenience meal is nondeductible for amounts paid after 2025. Pub 15-B adds a wrinkle: meals provided to boost morale aren't treated as furnished for your convenience, so ask the preparer how a given team meal fits. Set up an Employee Meals - Nondeductible (§274(o)) account if you're seeing material volume. It makes the year-end conversation with the tax preparer easier and keeps the client from re-asking next quarter. The expense is real, the cash went out the door, but no portion flows to the deduction line.
Two exceptions to keep in mind. The holiday party or picnic still hits 100% under §274(e)(4). De minimis items (the coffee pods, the bottled water, the donuts) are de minimis meals under Pub 15-B, not 100% items. Code them to their own account so the preparer can apply the post-2025 eating-facility rule.
For 2025 and earlier amounts you're still cleaning up, employer-convenience and de minimis meals were 50% deductible. Don't apply the §274(o) rule retroactively.
When the owner is on a business trip and grabs a $32 dinner alone, that's still 50% deductible. Code to Meals - 50% Deductible. The substantiation is the trip itself: dates, destination, business purpose, and the receipt once a meal reaches $75. The standard meal allowance (the federal M&IE rate, published on GSA.gov) is an alternative to actual cost for employees and self-employed owners, though you still record the time, place, and business purpose of the trip (Pub 463). Employers reimbursing staff can also use the high-low rates in IRS Notice 2025-54, the annual 2025-2026 notice. Either way, that's a tax-prep election, not a bookkeeping decision.
For a deeper breakdown of how travel meals interact with airfare, lodging, and conventions, see travel expenses category.
Set this up once in QuickBooks Online (QBO), before year-end. The goal is account-level separation, not class or tag separation.
In QBO, add a new account from your Chart of Accounts. Account type: an expense account. Detail type: the meals detail type your QBO file offers. Name: Meals - 50% Deductible. Save.
Growthy scores its confidence on every categorization and routes the low-confidence ones to human review, so a person checks the uncertain calls before they sync back to QBO. Every change lands in the categorization audit history. That keeps the manual click-through focused where it's needed.
Same path. Name: Meals - 100% Deductible. Use for the annual party or employee picnic and FMV sales to the public. De minimis snacks and coffee don't go here (see the 2026 rules above). Most service business clients will see only a few transactions a year hit this account. That's normal. Don't force volume into it just because it exists.
If your client is in the food-service industry (restaurant, catering, food truck), give employee shift meals their own account until the tax preparer confirms whether OBBBA's limited restaurant exceptions to §274(o) apply (Pub 15-B). That's a higher-volume use case where a separate account justifies itself fast.
Set up Entertainment - Nondeductible as a separate expense account, with the same detail type as your meals accounts. Yes, it's nondeductible. But the spend still hits the P&L, and the owner needs to see how much money is going to non-deductible client entertainment. Hiding it inside Meals - 50% distorts the meals line and mixes nondeductible spend into a deductible account.
If you want a cleaner P&L, group all three accounts under a parent account called Meals & Entertainment. The parent rolls up the total spend, and the three sub-accounts feed the right tax lines. See expense account categories for the full account structure pattern. The full chart of accounts framework lives in the chart of accounts hub.
A handful of mistakes show up in nearly every clean-up engagement. Catching them up front prevents painful conversations in March.
The single most common error. Tickets, golf, fishing, concerts, sporting events all get coded to Meals because the credit card statement says "Topgolf" and the bookkeeper isn't sure where else it goes. Result: at tax time, the preparer has to dig through every meals receipt to pull out entertainment. Or worse, the return claims a 50% deduction on entertainment, which §274(a) doesn't allow.
Fix: separate account for entertainment, set up on day one of the engagement. Code to it consistently, even when the dollar amount feels small.
The annual holiday party shows up as a $4,200 catering charge in December. Coded to Meals - 50%, the deduction is $2,100. Coded correctly to Meals - 100%, the deduction is $4,200, a $2,100 swing on a single transaction. Multiply across summer outings, employee appreciation events, and you're leaving real deduction value on the table.
Fix: ask the owner once a quarter whether any team-wide events happened. Code the catering invoice to Meals - 100% and attach a one-line memo confirming the event was primarily for employees, not just owners or highly compensated staff.
Records decide the deduction. For travel meals, §274(d) denies the deduction unless you substantiate the amount, the time and place, and the business purpose. For any business meal, Pub 463 says a restaurant receipt is enough if it shows the restaurant's name and location, the number of people served, and the date and amount. A canceled check by itself doesn't prove a business purpose, and a credit card statement showing "Capital Grille $187.40" isn't enough on its own either. The receipt plus the memo line ("lunch with Kevin Patel, prospect, Q2 contract discussion") is.
Fix: receipt-capture app integrated with QBO, mandatory memo on every meals transaction, monthly review for blank memos. Receipts plus memos plus the right account = clean audit defense and clean deduction at filing.
Meals and entertainment need three separate accounts, not one, and the split has to be correct before the books go to a tax preparer. Growthy pulls transactions in through Plaid bank feeds, scores its confidence on each categorization for human review, and syncs categories both ways with QuickBooks Online, with an audit history of every change. See how Growthy's features handle the meals and entertainment category.
Food for your business goes in a meals expense account, not a general food account. Client, prospect, and travel meals go in Meals - 50% Deductible. Entertainment goes in its own nondeductible account. The few 100% meals, like the annual party, get their own account too. Separate accounts let your tax preparer apply the right percentage at filing.
In QBO, add a new account from your Chart of Accounts. Pick an expense account type and the meals detail type your file offers. Name the account Meals - 50% Deductible. Add a second account for 100% meals and a third for entertainment. Code the full bill, including tax and tip, because the 50% limit covers taxes and tips too and the tax software applies it at filing.
For amounts paid after December 31, 2025, §274(o) ends the employer deduction for employer-convenience meals and eating-facility food. The 2017 TCJA set that date, and OBBBA only added limited exceptions. Consider an Employee Meals - Nondeductible (§274(o)) account for that spend. The holiday party or picnic is different. Restaurants and a few industries have narrow exceptions. For 2025 and earlier amounts, don't apply the new rule.
Meals are food and drink with a business purpose, and most are 50% deductible. Entertainment is tickets, golf, fishing trips, and club dues, and it's 0% deductible since TCJA. If one receipt has both, such as a client meal at a game, split it. Food and drink go to the meals account. Tickets go to the entertainment account.
A short list stays at 100%. That includes the annual company holiday party or summer picnic held primarily for employees other than owners and highly compensated staff, and meals sold to the public at fair market value. It also covers meals on certain vessels, offshore platforms, and drilling rigs, and other recreational or social events that meet the §274(e)(4) requirements. For the annual party, document the date, attendee list, and who it was for.
Entertainment covers tickets to a game, a round of golf, a charter fishing trip with a prospect, and concerts. Country club dues also count as 0%. Code all of it to Entertainment - Nondeductible. The spend still shows on your P&L, so the owner sees the real cost. Burying it in a meals account distorts that line and claims a deduction entertainment doesn't get.
Growthy is bookkeeping software, not a CPA firm. This content is educational, not professional advice. Full disclaimer.
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*Related: Chart of Accounts, Expense Account Categories, *Travel Expenses Category
Meals-and-entertainment transactions show up across restaurants, delivery apps, catering, and event venues. The category lives or dies on getting two splits right: 50% deductible client/business meals vs 100% deductible team-event meals, and the 2026 change under §274(o), enacted by the 2017 TCJA, that eliminated the employer-convenience meal deduction (OBBBA only added exceptions).
- Uber Eats (via Uber for Business): Food delivery, not rideshare. Code to
Meals & Entertainment - 50% when the meal is a documented business meal with a client or for the owner traveling. Under §274(o), for amounts paid after 2025, staff meals furnished at the office for the employer's convenience are no longer deductible, unless the spend is a 100% employee event like a holiday party or picnic under §274(e)(4). Check the Uber statement detail to tell Eats orders apart from rides on the same vendor account. The full rule including how to handle mixed monthly statements is in the Uber for Business categorization rules. - DoorDash for Business, Grubhub Corporate: Same logic as Uber Eats. 50% with documented business purpose, 0% when it's an employer-convenience meal paid after 2025 (§274(o)).
- Restaurants on a business card (client meals): Default to
Meals & Entertainment - 50%. Keep the receipt (Pub 463: restaurant name and location, people served, date, amount) and note the business purpose and attendees. A credit-card line item alone isn't enough. - Caterers for an annual party or employee picnic:
Meals & Entertainment - 100%. This is the employee recreation exception in §274(e)(4), which §274(n)(2)(A) exempts from the 50% limit. Keep this in a separate sub-account from the 50% line so the tax preparer doesn't have to back into it at filing. - Concert tickets, golf outings, sporting events:
Entertainment - 0% (or just Non-Deductible Entertainment). Entertainment has been 0% deductible since TCJA 2017. Coding it to the 50% meals line claims a deduction §274(a) doesn't allow.
