The IRS recently released Notice 2023-68 to give the updated per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses they incur while traveling away from home. Taxpayers may use the methods in the Notice without having to maintain the supporting documentation normally required by the tax law.
The notice is effective for any per diem allowance paid for lodging, meal, and incidental expenses after October 1, 2023, the beginning of the U.S. Government’s fiscal year. Rev. Proc. 2019-48 provides further rules and explanation to the per diem methods, and the specific rates are indexed annually by a notice.
Notice 2023-44 covers:
- Meal & incidental expense rates for the transportation industry
- Rate for the incidental expenses only deduction
- Annual high-low rates for the high-low substantiation method
Transportation Industry
Special rules apply for those who work in the transportation industry. Someone who works in the transportation industry is defined in Rev. Proc. 2019-48 as someone whose work directly involves moving people or goods by airplane, barge, bus, ship, train, or truck. The person must also regularly travel away from home to localities with differing rates. The rate for meal and incidental expenses for travel in the continental US remains at $69 per day. For outside the continental US, it’s $74 per day.
Incidental Expenses
The incidental expenses only deduction remains at $5 per day for any travel inside or outside of the continental US. Incidental expenses are defined by Rev. Proc. 2019-48 as fees and tips to porters, baggage carriers, bellhops, hotel staff, and staff on ships.
“High-low”
Under the high-low substantiation method, the federal per diem rate to be used is the “high” rate for high-cost localities and the “low” rate for all other localities. The annual high-low rate for the high-low substantiation method is $309 for travel to any high-cost locality and $214 for travel to any other locality within the continental US. This rate includes lodging, meals, and incidental expenses.
For meal and incidental expenses only, the rate is $74 for travel to any high-cost locality, and $64 for travel to any other locality within the continental US. See pages 3-7 of Notice 2023-68for a complete list of high-cost localities. There is no rate for lodging alone.Some places are only considered “high-cost localities” for certain portions of the year.Since the last IRS notice, a handful of localities have been added to the list of high-cost localities. Please see the notice for the complete listing.
