Meals Furnished to Employees

For tax years beginning after 1997, the 50% limit on deductions for meals generally does not apply to meals you furnish to employees on your business premises if all of the meals are excluded from the employees' wages because you furnished them for your convenience (for substantial business reasons other than to provide additional pay). For more information, see chapters 3 and 4 in Publication 535, Business Expenses.

Also, under a special rule enacted in 1998 for any tax year, you can treat all meals you furnish to employees on your business premises as furnished for your convenience if more than half (instead of substantially all) of these employees are furnished the meals for your convenience. For more information, see chapter 3 in Publication 535.

Meals When Subject to Hours of Service Limits

Beginning in 1998, you can deduct 55% of the reimbursed meals your employees consume while away from their tax home on business during or incident to any period subject to the Department of Transportation's hours of service limits. The percentage remains 55% for 1999, and it gradually increases to 80% by the year 2008. For more information, see chapter 16 in Publication 535.

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