Starting Oct. 1, the per diem rates used to calculate tax deductions for business travel expenses will be $319 to high-cost locations and $225 to low-cost areas, which are the same amounts as the previous year, according to the IRS.
Each year the IRS announces special per diem rates taxpayers can use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home.
Notice 2025-54, which the tax agency published on Sept. 23, provides the special transportation industry per diem rates just for meals and incidental expenses, 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 for the period of Oct. 1, 2025, to Sept. 30, 2026.
The use of a per diem substantiation method is not mandatory. Taxpayers can substantiate the actual allowable expenses if they maintain adequate records or other sufficient evidence for proper substantiation, the IRS said.
M&IE rates for transportation industry: The special meals and incidental expenses per diem rates for taxpayers in the transportation industry are unchanged—$80 for any locality of travel within the continental U.S. and $86 for any locality of travel outside CONUS.
A transportation Industry worker is defined as “an employee or self-employed individual whose work is of the type that directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and regularly requires travel away from home.”
Rate for the incidental expenses-only deduction: The rate for any travel locale inside or outside CONUS for the incidental expenses-only deduction is still $5 per day.
Incidental expenses are specific, minor out-of-pocket costs incurred by an individual during business travel that are distinct from major expenses like lodging and meals.
According to IRS Publication 463, incidental expenses specifically refer to fees and tips paid to porters, baggage carriers, hotel staff, and crew members on ships.
Rates for high-low substantiation method: For purposes of the high-low substantiation method, the per diem rates remain $319 for travel to any high-cost locality and $225 for travel to any other location within CONUS.
The portion of the rates that is treated as paid for meals for purposes of Section 274(n) was kept at $86 for travel to any high-cost locality within CONUS and $74 for travel to any other locality within CONUS.
Notice 2025-54 also provides an updated list of high-cost localities that have a federal per diem rate of $272 or more.
Revenue Procedure 2019-48 provides the rules for using per diem rates, rather than actual expenses, to substantiate the amount of expenses for lodging, meals, and incidental expenses for travel away from home. Taxpayers who use per diem rates to substantiate the amount of travel expenses under Rev. Proc. 2019-48 may use the federal per diem rates published annually by the General Services Administration. Rev. Proc. 2019-48 allows certain taxpayers to use a special transportation industry rate or to use rates under a high-low substantiation method for certain high-cost localities. The IRS announces these rates and the rate for the incidental expenses-only deduction in an annual notice.
Photo credit: Natalia Bratslavsky/iStock
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