Overview

Recent court rulings have narrowed the practical test for when a business meal is deductible. Courts are focusing less on the taxpayer’s label for an expense and more on the objective facts: who attended, what business was discussed, why the meal was necessary, and whether the cost was reasonable. These judicial decisions sit alongside Congress’s rules (TCJA changes to entertainment) and IRS guidance (Publication 463), so taxpayers must satisfy both statutory limits and the evidentiary standards courts now expect. IRS Pub. 463 is the primary IRS reference for meal deductibility.

How the law and courts interact

  • Statutory baseline: Internal Revenue Code Section 162 allows ordinary and necessary business expenses; Section 274 imposes special limits on meals, entertainment, and lavish expenses.
  • TCJA effect: The Tax Cuts and Jobs Act (2017) disallowed deductions for most entertainment expenses but kept meal deductions subject to percentage limits.
  • Temporary restaurant exception: Recent IRS guidance created temporary 100% deductions for certain restaurant-provided meals in limited years; check current IRS announcements for year-by-year status. (See IRS Pub. 463.)
  • Judicial refinement: Courts have increasingly required contemporaneous records and clear evidence of business purpose and necessity. A taxpayer’s post hoc testimony is less persuasive without supporting documentation.

Key practical changes driven by case law

  1. Stronger documentation standard
  • Courts expect contemporaneous notes showing date, location, attendees, business topics, and business relationship. A calendar entry plus a receipt is often stronger than recollection months later.
  1. Clearer business purpose requirement
  • It’s not enough that business could have been discussed; courts look for evidence that business actually was discussed and that the meal had a business reason (e.g., negotiation, client solicitation, project planning).
  1. Stricter scrutiny of ‘‘mixed’’ or social settings
  • Meals that are essentially social (team celebrations, family events) or occur in entertainment contexts get closer IRS/court scrutiny and may be disallowed.
  1. Reasonableness and lavishness
  • Courts continue to apply a reasonableness test. Extravagant meals without proportional business justification are at high risk of denial.

Who is affected

  • Small-business owners, freelancers, salespeople, and any business that regularly pays for client or prospect meals. This includes restaurants that provide business meals on behalf of clients and gig economy workers who meet clients for work.

Practical steps to protect deductions (my practice-backed tips)

  1. Document contemporaneously: record date, names and business relationship of attendees, specific business topics discussed, and the business purpose. Photos and calendar invites help but don’t replace notes. (In my practice I’ve seen audits resolved quickly when clients kept one-page meeting notes tied to receipts.)

  2. Save receipts and tie them to entries: keep itemized receipts and link each receipt to meeting notes or calendar entries.

  3. Distinguish meals from entertainment: document if a meal was ancillary to an entertainment event or primarily social—different rules apply.

  4. Avoid extravagance: when possible, choose modest venues and explain why the expense was necessary for business.

  5. Review year-by-year special rules: Congress and the IRS sometimes offer temporary changes (for example, limited-time expansions for restaurant meals). Confirm current treatment for the tax year you claim. See IRS Publication 463 for ongoing guidance.

Examples

  • Deductible: Lunch at a restaurant where you meet a new client, discuss a project’s scope, and contemporaneously record attendee names and topics.
  • Risky: A large holiday party where business talk is incidental and the expense appears social—courts are likely to disallow deduction without strong proof of business purpose.

Common mistakes

  • Relying on memory months later without contemporaneous notes.
  • Using generic ledger entries (e.g., “meals”) without attendee names or business purpose.
  • Treating entertainment and meals the same when the TCJA draws a distinction.

Related resources

What to do if audited

Present contemporaneous receipts, calendar entries, and meeting notes. If you lack contemporaneous documentation, provide the next-best proof (email threads, contracts, attendee corroboration) and consult a tax professional.

Professional disclaimer

This article is educational and general in nature and does not substitute for personalized tax advice. Tax outcomes depend on facts and applicable law; consult a qualified tax advisor for guidance tailored to your situation.

Authoritative sources

  • IRS Publication 463, Travel, Gift, and Car Expenses: https://www.irs.gov/publications/p463
  • IRS Newsroom guidance on temporary 100% deduction for restaurant meals (search IRS newsroom for the latest year-specific guidance).

Last reviewed: 2025.