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Are employer-provided meals tax free?

Are meals provided to employees at work tax free for employees? I have been asked this question many times. Is there such a thing as a free lunch?


Normally, The employer needs to include the value of employer-provided meals in the employee's gross income. However, there is exception to the rule:


The value of meals you offer to an employee free of charge is excluded from the employee's gross earnings and also from salaries for employment tax purposes if the meals are supplied (1) for the "convenience of the employer," and also (2) on your business facilities. Your "business facilities" normally is where your employee works. The key is to demonstrate that the meals were provided for a substantial noncompensatory business reason.


Meals you offer to an employee at no cost are considered to be provided for the convenience of the employer as long as you supply the meals for substantial noncompensatory business reasons. Instances of substantial noncompensatory business reasons might consist of


(1) you require the employee to be readily available for emergency calls throughout the meal period,


(2) The business requires that the employee has a less than one-hour mealtime, and the employee can not be expected to consume in other places in such a short time; and also


(3) the employee can not find a place to eat under a reasonable meal period because there are insufficient different eating places within the vicinity of the company's facilities). Meals provided to a restaurant or food service workers are considered as furnished for a substantial noncompensatory business reason of the employer. If an employee is required to live at the business premises living quarters, then the exclusion will apply to the value of any type of meal you provide without charge to the employee living on such facilities.


Normally, all meals you offer to employees on your business premises are considered as "for convenience of the employer" if over 50% of the employees get such meals for the convenience of the employer.


If you provide no-cost meals as a means of providing additional compensation and also not for a substantial noncompensatory business reason, then the meals are not excludable from the employee's gross earnings under this regulation. Any type of meal you supply to employees on nonwork days does not receive exclusion under this regulation.


Under a different regulation, the value of periodic meals (or meal money) you offer free of charge to allow an employee to work overtime, in addition to free meals provided at periodic events and also barbecues, picnics, new year parties for employees and also their visitors, can be excluded from the employees' income as de minimis fringe benefits.


Please call me at your convenience If you have further questions.



CPA San Jose, CPA San Francisco  

T: 888-388-1422

T: 415-704-8989

F: 415-805-8934

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