If your accounting system still lumps all meals into one expense account and all travel into another, you're heading into 2026 with a problem. The OBBBA tax changes mean that different types of meals and travel expenses now have different deductibility rates and if you can't separate them in your books, you'll struggle at tax time.
The Old Way No Longer Works
For years, many businesses used a simple structure: one account for meals, one for travel, maybe one for entertainment. At year-end, your accountant would apply the standard 50% limitation to meals and move on. That approach made sense when the rules were straightforward.
Starting January 1, 2026, the landscape is more complex. Some meals remain 50% deductible, others are 100% deductible, and a new category—employer-provided convenience meals—drops to 0%. Travel expenses have similar tiers. Without separate accounts for each category, you're left making year-end estimates instead of tracking actuals, and estimates invite both errors and audit risk.
The Six Accounts You Need
To properly track deductibility under the new rules, your chart of accounts should include these six expense categories:
- Meals – 100% Deductible
- Company picnics, holiday parties, and other recreational events primarily for non-highly compensated employees. Also includes meals treated as taxable compensation and meals sold at fair market value.
- Meals – 50% Deductible
- Client and prospect meals with documented business discussion, meals while traveling for business, team lunches where business is conducted.
- Meals – Non-Deductible (0%)
- On-site meals for employer convenience (cafeteria, breakroom snacks, overtime meals), meals without business discussion, lavish or extravagant meals.
- Travel – 100% Deductible
- Airfare, lodging, car rentals, rail tickets, per diem within federal limits, and other transportation costs for legitimate business travel.
- Travel – 50% Deductible
- Transportation to and from business meals (the meal itself goes in a meals account; getting there is travel).
- Travel – Non-Deductible (0%)
- Investment seminars unrelated to your trade or business, educational travel where the travel itself is the education, personal portions of mixed-purpose trips.
Implementation Steps
Updating your chart of accounts isn't complicated, but it requires deliberate action before year-end:
- Add the new accounts to your accounting software now, while there's time to test
- Update expense policies so employees know which account to use for each expense type
- Train your team on the differences—the distinction between 50% and 0% meals isn't always obvious
- Configure expense software to prompt for the right category when meals or travel are submitted
- Review coding monthly to catch misclassifications before they compound
The Cost of Getting It Wrong
Without proper categorization, you face two risks. First, you might claim deductions you're not entitled to—leading to adjustments, interest, and penalties if audited. Second, you might miss legitimate deductions because everything got dumped into a conservative 50% or 0% bucket. Either way, you're not getting an accurate picture of your tax liability, and you're making your accountant's job harder than it needs to be.
Don't Forget Documentation
Proper account coding goes hand-in-hand with proper documentation. The IRS requires substantiation of the amount, date, place, business purpose, and business relationship for every travel and meal expense. A credit card statement alone won't cut it—you need receipts and written records that capture the who, what, when, where, and why. Make sure your expense submission process collects this information at the point of entry.
