IRS keeps per diem rates unchanged for business travel year starting Oct. 1

The special per diem rates that a taxpayer may use in substantiating travel and business expenses under the per diem substantiation method (set out in Rev. Proc. 2019-48) remain the same as the previous year, as provided by the IRS in Notice 2025-54 and applicable starting Oct. 1.

Generally, under the per diem substantiation method, if an employer or other payer pays a per diem allowance in lieu of reimbursing an employee’s actual expenses for lodging, meals, and incidental expenses, the amount deemed substantiated for each calendar day is the lesser of the allowance amount for that day or the amount computed under federal per diem rates for the place of travel within the continental United States (CONUS).

A separate federal rate applies to per diem allowances just for meals and incidental expenses (M&IE). Taxpayers using the rates and the list of localities in Notice 2025-54 must comply with the rules for the per diem substantiation method in Rev. Proc. 2019-48.

High-low substantiation method rates

The high-low substantiation method applies a higher rate to designated high-cost localities, which remains in effect for a specified portion of the calendar year, and a lower rate to all other localities. The annual update includes the per diem rate under the high-low substantiation method for travel within CONUS.

The rate for travel to high-cost localities within CONUS remains $319, and the rate for non-high-cost localities remains $225. The portion of the rates treated as paid for meals for purposes of Sec. 274(n) will remain the same at $86 for high-cost CONUS localities and $74 for all other CONUS localities.

The notice revised the list of high-cost localities for the upcoming new annual period (Oct. 1, 2025, to Sept. 30, 2026) for which the new rates are in effect. High-cost localities have a federal per diem rate of $272 or more.

Transportation industry rates

The notice also provides special rates for taxpayers in the transportation industry. The M&IE rates remain unchanged from the previous year at $80 for any locality of travel within CONUS and $86 for localities of travel outside CONUS.

The rate for incidental expenses remains $5 per day for travel in and outside CONUS.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.