There is a quiet tax law change taking effect in 2026 that could increase costs for many businesses providing coffee, snacks, and other small refreshments to employees. For years, these items have been treated as de minimis fringe benefits, meaning employees are not taxed on them, and employers were generally allowed a deduction. But beginning January 1, 2026, the tax code stemming from the Tax Cuts and Jobs Act of 2017 eliminates the employer deduction, while the benefit remains tax-free for employees.
From a practical standpoint, this rule may influence how businesses approach workplace amenities. Many employers offer coffee and snacks to improve productivity, encourage collaboration, and keep employees on-site. Eliminating the deduction may lead some businesses to scale back these offerings, though doing so could negatively affect culture.
Businesses should consider:
- Reviewing current spending on employee refreshments
- Estimating the increased cost and after-tax cost beginning in 2026
- Determining whether the benefits in productivity and workplace culture justify the expense
- Ensuring accounting properly reflects the non-deductible nature of these expenses
What is still allowed? – Businesses may continue to deduct 100% of the cost to provide reasonable refreshments to clients and prospects for office meetings. Company-wide social gatherings remain fully deductible as long as the primary beneficiaries are the employees.
Staying ahead of tax law changes can help businesses avoid surprises and make smarter business decisions. Killingsworth Spencer in Roswell, GA, is dedicated to helping taxpayers in Fulton and Cobb Counties determine the best options for their particular circumstances. For more information on any tax matter or to schedule an appointment, please call us at 770-552-8286. Visit us at www.killingsworthspencerllc.com
Disclaimer: This post is for general information only and should not be taken as legal or financial advice.