There’s an ugly tax law change that took effect in 2026 that affects a common workplace practice: providing coffee, snacks, and other small refreshments to employees.
Here’s what happened.
For years, these items have been treated as “de minimis fringe benefits”, meaning employees are not taxed on them & employers were generally allowed a deduction. But in 2026, the tax code eliminates the employer’s deduction, even though the benefit remains tax-free to employees.
This change stems from the Tax Cuts and Jobs Act, which gradually phased out the deduction. While employers could deduct 50 percent of these costs through 2025, the deduction drops to 0 percent starting in 2026.
So what does this mean?
Now, your business bears the full cost of providing break-room refreshments. This creates an unusual mismatch: employees still receive a tax-free benefit, but employers receive no tax relief for providing it. Kinda stupid, isn’t it?
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 morale and efficiency.
What should you do now?
- Review your current spending on employee refreshments.
- Evaluate the increased cost beginning in 2026.
- Consider whether the benefits in productivity and workplace culture justify continuing the practice.
- Ensure your accounting properly reflects the non-deductible nature of these expenses… categorizing becomes more important now (nudge nudge, say no more).
While this tax-law change seems minor, and it is – I do think there are more important things that our Government, the IRS and federal spending should be focusing on. Just my 2 cents.