IRS Per Diem Rate Update

The Internal Revenue Service (IRS) has issued its annual update (IRS Notice 2017-54) describing the 2017-2018 special per diem rates to be used for lodging, meals and incidental expenses. IRS Rev. Proc. 2011-47 provides rules for using a per diem rate to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Per diem rates are fixed rates, established by the IRS, that employers are permitted to use to reimburse employees for travel related expenses including combined lodging and meal costs, or solely for meal costs. Per diem amounts paid to employees are excluded from employee’s wages for federal tax purposes so long as the payments are less than or equal to the federal per diem rate and the employee provides a detail of the travel related expenses. The new IRS guidance provides specific information on the rate for the incidental expenses only deduction, the rates and list of high-cost localities for purposes of the high-low substantiation method, and meal and incidental expenses for the travel industry. This notice is effective for lodging, meal and incidental expenses paid on or after October 1, 2017 for travel away from home taking place after October 1, 2017.

Please note the following changes that may impact non-profits and governments with personnel traveling to conduct business:

Rate for Incidental Expenses Only Deduction

-The rate for any locality of travel for the incidental expenses only deduction is $5 per day. Refer to Section 4.05 of IRS Rev. Proc. 2011-47.

High-Low Substantiation Method

­-For purposes of the high-low substantiation method, the per diem rates are $284 for travel to any high-cost locality as defined and $191 for travel to any other locality within the Continental United States.

Meal and Incidental Expenses Only Substantiation Method

The per diem rates for the meal and incidental expenses only substantiation method are $68 for travel to any high-cost locality as defined and $57 for travel to any other locality within the Continental United States.

Please note this summary is not meant to substitute for reading the IRS update in its entirety.