IRS Updates Per Diem Business Travel Standard Rates
Angela Lawrence, Paraprofessional at Klatzkin, contributed to this post.
In late September 2022, the IRS released Notice 2022-44, which outlined the changes coming to the special per diem rates used by taxpayers to substantiate ordinary and necessary business travel expenses. Beginning October 1, the rates are slightly higher.
Instead of accounting for each individual expense for lodging, meals, and incidental expenses, for federal tax purposes, a taxpayer can use up to or equal to an established per diem rate for expenses incurred in employment-related travel, depending on the locality of travel. The high-low substantiation method produces a higher rate for designated high-cost areas and a lower rate for all other localities for travel within the continental United States.
Annual Per Diem Update
The annual update, starting October 1, includes a per diem rate in high-cost localities of $297; the rate for non-high-cost localities will be $204. This is an increase from $296 and $202, respectively, from the previous year. The portion of the per diem rate treated as paid for meals will remain the same, at $74 for high-cost areas and $64 for all other localities. The IRS notice also lists the revised directory of high-cost localities in the continental United States, which have a federal per diem rate of $250 or more, and the specific times of the year that they are considered high-cost areas.
In addition, there are special rates for taxpayers within the transportation industry. The IRS notice gives those rates, which for meals and incidentals is $69 for all locations in the continental United States and $74 for places outside the continental United States. These rates are unchanged from the prior year, as is the incidental-expenses-only rate, which remains $5 per day.
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©2022 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and should not be construed as accounting, tax, or financial advice. Please consult your tax advisor concerning your specific situation.