C Corporation Deductions: Meals, Entertainment, and Depreciation Rules (2025-2026)

Are business meals deductible for C corporations?

Yes, but only at 50%. Business meals are deductible if they are ordinary and necessary, not lavish or extravagant, and the taxpayer or an employee of the taxpayer is present.

The temporary 100% deduction for restaurant meals was COVID-era relief that applied only to tax years 2021 and 2022 (under the Consolidated Appropriations Act of 2021). For 2025 and 2026, the standard 50% limitation applies.

Are entertainment expenses deductible?

No. Since the Tax Cuts and Jobs Act of 2017, entertainment expenses are fully non-deductible. This includes taking clients to sporting events, concerts, golf outings, or any recreational activity.

This is a permanent change — there is no expiration date. Even if the entertainment has a clear business purpose, it cannot be deducted.

What are book-to-tax differences?

Book-to-tax differences are items that are treated differently for financial accounting (books) versus tax purposes. Common examples include:

Non-deductible for tax: Government penalties and fines, entertainment expenses, federal income tax expense, political contributions, and certain excess executive compensation.

Different timing for tax: Depreciation (you may use straight-line over 5 years for books but bonus depreciation for tax), prepaid expenses, and accrued liabilities.

These differences are reconciled on Schedule M-1 (or M-3 for corporations with $10M+ in assets).

How does depreciation work for C corporations?

C corporations can use several depreciation methods for tax purposes:

Bonus depreciation: Allows 100% first-year deduction for qualifying assets placed in service (being phased down — 60% for 2024, 40% for 2025, 20% for 2026, and 0% for 2027 onward).

Section 179: Allows immediate expensing of qualifying business property up to the annual limit ($1,250,000 for 2025). The deduction phases out dollar-for-dollar when total qualifying property exceeds the threshold ($3,130,000 for 2025).

MACRS: The standard Modified Accelerated Cost Recovery System for depreciating assets over their class life (3, 5, 7, 15, 27.5, or 39 years depending on asset type).