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Travel Expense – Per Diem Allowances

Updated: Nov 6, 2023

September 8, 2023



Keeping track of business travel expenses, such as the costs of lodging, meals and incidental expenses, can be a very time-consuming task. In lieu of substantiating actual travel costs, the IRS provides optional per diem allowances, which employers and employees are deemed to have substantiated by adequate records or other sufficient evidence. The optional per diem allowances are intended to simplify recordkeeping, and depending upon your business, may indeed make the task of keeping track of business travel expenses less burdensome. There are two different methods of calculating a per diem amount.


<1> GSA (U.S. General Services Administration) per diem rate

Under the per diem substantiation method, if a payer pays a per diem allowance in lieu of reimbursing actual expenses, the amount of the expenses deemed substantiated equals the lesser of:

  • the per diem allowance; or

  • the amount computed at the federal per diem rate for the locality of travel for the period that the employee is away from home

Federal per diem rates by location can be viewed on U.S. General Services Administration (GSA) website.

https://www.gsa.gov/travel/plan-book/per-diem-rates Here are examples of the federal per diem rates.

(Primary Destination: Chicago - October 2022 – September 2023)


(Primary Destination: Chicago - October 2023 – September 2024)



<2> High-Low substantiation method

Alternatively, the payer may use the high-low substantiation method for travel within CONUS. CONUS is the continental United States, exclusive of Alaska. Under this method, the amount of expenses that is deemed substantiated is the lesser of:

  • the per diem allowance; or

  • the federal per diem rate for the high- or low-cost locality, as applicable.


(October 2022 – September 2023)

※The federal per diem rates for high-low substantiation method for October 2023 – September 2024 will be announced by IRS around the end of September 2023.


The high/low method uses only two rates: one for high-cost localities and one for all other localities. The IRS generally updates the list of high-cost localities and the rates annually, effective October 1; however, taxpayers can use the rates and localities in effect for the first nine months of a year for the remainder of the year, as long as this is done consistently.


The list of high-cost localities for 2022-2023 can be viewed on Notice 2022-44

(2022-2023 Special Per Diem Rates)

Example for GSA per diem rate

John travels to Chicago for his employer in April 2023. According to the GSA website, the federal per diem for lodging in Chicago is $216; the per diem for meals and incidental expenses is $79. In May, Jhon travels to St. George, Utah. According to the GSA website, the maximum per diem for lodging in St. George is $98; the per diem for meals and incidental expenses is $59.


Example for high-low method

John travels to Chicago for his employer in April 2023. Chicago is a high-cost locality. The IRS-approved per diem for lodging in Chicago is $223; the per diem for meals and incidental expenses is $74. In May, Jhon travels to St. George, Utah, which is not a high-cost locality separately listed by the IRS. Therefore, the maximum per diem for lodging in St. George is $140; the per diem for meals and incidental expenses is $64.


References

For specific regions in the United States, please visit U.S. General Services Administration site to find the applicable per diem rate.


For international travels, please visit the U.S. Department of State site to find the applicable per diem rate.


For the list of high-cost localities for 2022-2023

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