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How to Benefit from the Supper Money Fringe Benefit

You can take advantage of the supper money fringe benefit as a business owner.

Here’s how it works:

The Supper Money Fringe Benefit

  • This benefit applies to defined employees.
  • The IRS defines “employee” for this benefit as anyone who receives supper money.

You can use this benefit for yourself, even as a sole proprietor. You also qualify if you run your business as a corporation or a partnership.

Caution: Even though you technically qualify as an “employee,” it’s best to use this rule for personal meals only when you provide the allowance to other employees working late with you.

Supper Money Deduction

The supper money fringe benefit provides your team with tax-free meal money. It allows you, the employer, to deduct 50 percent of the meal money.

Example: You and an employee work overtime to complete a task. You each receive $56 for dinner. You can deduct half the $112 if you meet the four rules below. The $56 is tax-free for you and the employee.

Two Things You Should Know

The supper money fringe benefit used to be 100% deductible, but the Tax Cuts and Jobs Act (TCJA) changed this. Now, the deduction is 50% for tax years 2018–2025.

In 2026, the TCJA eliminates all tax deductions for supper money. The money remains tax-free for the employee, but the business cannot deduct it.

Four Rules for Business Success

The rules allow supper money to be a tax-free benefit if these conditions are met:

  1. You provide the benefit occasionally.
  2. You pay a reasonable amount.
  3. The meal enables the employee to work overtime.
  4. You don’t calculate the benefit based on hours worked. For example, a $30 allowance per hour of overtime is not allowed. Instead, give a discretionary meal allowance, like $56.

Consequence of Violation: If you don’t follow these four rules, the supper money becomes taxable compensation for the employee and is subject to withholding and payroll taxes. This could lead to unhappy employees. However, it creates a 100 percent deduction for the employer and incurs employer payroll taxes.

Supper Money Fringe Benefit FAQs

The supper money fringe benefit allows businesses to provide tax-free meal allowances for employees working overtime, with a 50 percent tax deduction for the employer.

Anyone who receives supper money qualifies as an employee, including business owners.

  1. Provide the benefit only occasionally.
  2. Pay a reasonable amount.
  3. Ensure the meal enables overtime work.
  4. Do not base the benefit on hours worked.

If the rules are not met, the supper money is taxable compensation subject to withholding and payroll taxes.

The TCJA reduced the deduction to 50 percent for tax years 2018–2025 and eliminated it in 2026. However, the money remains tax-free for employees.

Yes, sole proprietors can use this benefit for themselves, provided they offer it to employees.

A reasonable amount is not specified but should be a fair market value for a meal, like $56.

Starting in 2026, supper money will no longer be deductible, though it remains tax-free for employees.

Yes, it applies to corporations, partnerships, and sole proprietorships.

Maintain records of the occasion, amount, and employees receiving the benefit to support the deduction.

Applying this benefit correctly and documenting it thoroughly is crucial to avoid potential issues. Always consult with a tax professional to navigate the complexities of fringe benefits and optimize your tax strategy. Properly utilizing the supper money fringe benefit can enhance employee satisfaction and increase your business’s overall tax efficiency.

Want to Provide Tax-Free Meal Benefits to Your Employees?

Learn how the supper money fringe benefit can enhance employee satisfaction and reduce your tax burden. Schedule a session today!

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