Effective January 1, 2026, several federal tax law changes are set to take effect that may impact both businesses and individual taxpayers. Two of the most notable updates involve meal expense deductions and gambling loss limitations.
Understanding these changes now can help you plan ahead, avoid surprises, and ensure expenses are categorized correctly.
Meal Expense Deduction Changes
The deductibility of meal expenses has evolved over the past few years, and 2026 introduces an important shift—particularly for employee-related meals.
Meal Expenses That Remain Unchanged
The following categories will continue to be deductible in 2026 under the same rules as 2025:
-
Business meals with clients or vendors
50% deductible -
Travel meals while away from home overnight
50% deductible -
Employee social or recreational events
(such as holiday parties or company picnics)
100% deductible -
Meals provided to the public or for promotional purposes
100% deductible -
Meals treated as taxable compensation and included on Form W-2
100% deductible
Meal Expenses Losing Deductibility in 2026
Beginning in 2026, certain employee meal expenses will no longer be deductible unless they are treated as taxable wages:
-
Employee meals provided for employer convenience
(on-site meals, office snacks, cafeteria meals, meals during work hours)-
2025: 50% deductible
-
2026: 0% deductible
-
-
Meals provided to remote employees
-
2025: 50% deductible
-
2026: 0% deductible unless included as taxable compensation
-
Why This Matters for Businesses
Many businesses currently deduct employee meals as a routine operating expense. In 2026, these costs may become fully non-deductible, increasing taxable income unless they are properly structured and reported.
Businesses should review:
-
How meal expenses are categorized in bookkeeping systems
-
Whether certain meals should be treated as taxable compensation
-
Internal policies around employee meals and remote work benefits
Proactive planning can help minimize the impact of these changes.
New Gambling Loss Deduction Rules
The tax treatment of gambling losses is also changing, and the impact may surprise even casual or break-even gamblers.
How Gambling Loss Deductions Will Work in 2026
Beginning January 1, 2026, gambling losses are limited by two separate rules:
-
Losses can only be deducted up to the amount of gambling winnings
(This rule remains unchanged.) -
Only 90% of gambling losses can be used to offset winnings
The deductible amount is the lesser of:
-
Total gambling winnings, or
-
90% of total gambling losses
Important Itemization Requirement
Gambling losses can only be deducted if you itemize deductions on Schedule A of your federal tax return. Taxpayers who take the standard deduction cannot deduct gambling losses at all, resulting in gambling winnings being fully taxable.
Key Takeaway
Under the new law, break-even gamblers may owe tax in 2026, even if they did not earn an actual profit. This change effectively creates taxable income that does not reflect economic reality for some taxpayers.
Planning Ahead
These tax law changes highlight the importance of proactive planning:
-
Businesses should review meal expense policies and bookkeeping classifications
-
Employers may need to reassess employee benefit structures
-
Individuals with gambling activity should understand how itemization and loss limits affect their tax liability
Do you think your business will be affected by these changes? Contact us!
Written By: Wendy Gifford-Garnsey