IRS Announces New Per Diem Rates – Did You Know?

The IRS recently raised the per diem rates for employee travel expenses, effective October 1, 2019. Within the Continental U.S., the new basic daily rates are $297 for high-cost regions (of which $71 is allotted for meals), and $200 for low-cost areas (with $60 for meals). The “incidentals only” per diem, which covers expenses like tipping bellhops, remains at $5 for all locations.

Per diems allow companies to reimburse employees for travel expenses at fixed rates, rather than having to process receipts for actual expenses. In most cases, per diem reimbursements can be deducted on the employer’s tax return and do not count toward employee wages, as long as employees file appropriate expense reports showing the location, dates and purpose of the trip. Note, however, that the meals portion of a per diem is subject to the standard 50% deduction limit for meal expenses.

Because the Tax Cuts and Jobs Act (TCJA) eliminated most deductions for unreimbursed employee expenses, finding the most efficient way to reimburse employees for travel expenses is more important than ever. An experienced tax pro can help you determine whether it is best for your company to use standard per diems or to track actual employee travel expenses.

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