Special Per-Diem Rates Issued for 2015–2016 Travel

On Wednesday, the IRS issued its annual update of special per-diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home in 2015 and 2016 (Notice 2015-63).The notice provides the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and the rates and list of high-cost localities for purposes of the high-­low substantiation method.

Four years ago, the IRS provided, in Rev. Proc. 2011-47, the general rules for using a federal per-diem rate to substantiate the amount of ordinary and necessary expenses for lodging, meals, and incidental costs paid or incurred for business-related travel away from home. Taxpayers using the rates and the list of localities in Notice 2015-63 must comply with the rules in Rev. Proc. 2011-47.

The updated rates are effective for per-diem allowances paid to any employee on or after Oct. 1, 2015, for travel away from home on or after that date, and supersede the rates in Notice 2014-57, which provided the rates for Oct. 1, 2014, through Sept. 30, 2015.

Incidental expenses

Since 2012, incidental expenses have included only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. The per-diem rate for the incidental-expenses-only deduction remains unchanged at $5 per day for any locality of travel.

Transportation industry

The special meals and incidental expenses rates for taxpayers in the transportation industry are $63 for any locality of travel in the continental United States and $68 for any locality of travel outside the continental United States.

High/low substantiation method

For purposes of the high/low substantiation method, the per-diem rates are $275 for travel to any high-cost locality and $185 for travel to any other locality within the continental United States. The amount of these rates that is treated as paid for meals for purposes of Sec. 274(n) is $68 for travel to a high-cost locality and $57 for travel to any other locality within the continental United States. The notice contains a list of the localities that are high-cost localities (localities that have a federal per-diem rate of $230 or more) for all or part of the calendar year.

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.