IRS ups per diem rates for business travel

The Internal Revenue Service is increasing some, but not all, of the special per diem rates for expenses while traveling as inflation continues to rise.

Notice 2023-68, released Monday, provides the 2023-2024 special per diem rates effective Oct. 1, 2023, for taxpayers to use to substantiate the amount of their expenses for lodging, meals and incidental expenses while they're traveling away from home. The notice includes the special transportation industry rate, along with the rate for the incidental-expenses-only deduction, as well as the rates and list of high-cost localities for purposes of the high-low substantiation method.

Use of a per diem substantiation method isn't mandatory, according to the IRS. Taxpayers can substantiate their actual allowable expenses if they maintain adequate records or other evidence for proper substantiation.

The special rates for meals and incidental expenses for taxpayers in the transportation industry are $69 for anywhere in the continental United States and $74 for outside the continental U.S. The rate for any locality of travel for the incidental-expenses-only deduction within or outside the continental U.S. is $5 per day. Those amounts all match the figures released in last September's annual notice for 2022-2023, as well as the previous year's notice for 2021-2022 (see story). 

However, there are some increases due to inflation in the amounts provided under the high-low substantial method. For purposes of the high-low substantiation method, the per diem rates are $309 for travel to any high-cost locality and $214 for travel to any other locality within the continental U.S. That's up from 2022-2023, when the amounts were $297 for travel to any high-cost locality and $204 for travel to any other locality within the continental U.S. (For 2021-2022, the rates were nearly identical at $296 for travel to any high-cost locality and $202 for travel to any other locality within the continental U.S.) 

For 2023-2024, the amount of the $309 high rate and $214 low rate that's treated as paid for meals for purposes of Section 274(n) of the Tax Code is $74 for travel to any high-cost locality and $64 for travel to any other locality within the continental U.S.  The per diem rates in lieu of the rates described in last year's Notice 2022-44 (the meal and incidental-expenses-only substantiation method) are $74 for travel to any high-cost locality and $64 for travel to any other locality within the continental U.S.

The notice also provides a list of high-cost localities that have a federal per diem rate of $261 or more (up from $250 or more for 2022-2023, and $249 or more for 2021-2022), and are considered to be high-cost localities for the specified part of the calendar year.