Business Travel Update: A Simple Breakdown of the New IRS Per Diem Rates
If you travel for business, you know the headache of tracking every single meal and coffee receipt. It can be a real pain, right? Every year, the IRS releases updated per diem rates to make our lives easier, and the new numbers for October 1, 2025, through September 30, 2026, are here! Whether you’re a seasoned road warrior, a small business owner, or an accountant, understanding these changes is key to accurate and hassle-free expense reporting. Let’s dive into what’s new in IRS Notice 2025-54 and how you can use it to your advantage. 😊
What Exactly Are Per Diem Rates? 🤔
Before we jump into the numbers, let’s quickly recap what “per diem” means. It’s a Latin phrase meaning “for each day.” In the context of business travel, it’s a fixed daily allowance that an organization provides to an employee to cover living expenses incurred while traveling for work. Instead of submitting a mountain of receipts for meals, lodging, and incidental expenses (we’ll get to those!), employees can use a set per diem rate.
The IRS provides standardized rates that taxpayers can use to substantiate these expenses without the need for detailed record-keeping of every single dollar spent. This is a huge time-saver! It’s important to remember that using the per diem method is completely optional. You can always choose to track and claim your actual expenses, but you must keep adequate records if you do.
The rules for using these rates are outlined in Rev. Proc. 2019-48. This notice, 2025-54, provides the specific dollar amounts and locality lists for the upcoming fiscal year, which begins on October 1, 2025.
Key Updates in IRS Notice 2025-54 for 2025-2026 📊
This annual notice is the go-to document for the latest rates. It specifically covers three main areas: the high-low substantiation method, special rates for the transportation industry, and a rate for incidental expenses only. Let’s break down the new figures.
Summary of 2025-2026 Per Diem Rates
| Rate Type | Rate Amount | Applicable To |
|---|---|---|
| High-Low Method (High-Cost) | $319 | Travel to a designated high-cost locality. |
| High-Low Method (Other) | $225 | Travel to any other locality within CONUS. |
| Transportation M&IE (CONUS) | $80 | Travel within the continental U.S. |
| Transportation M&IE (OCONUS) | $86 | Travel outside the continental U.S. |
| Incidental Expenses Only | $5 per day | Any locality, CONUS or OCONUS. |
These rates are effective for travel on or after October 1, 2025. For travel during the last three months of the 2025 calendar year (October, November, December), there are special transition rules outlined in Rev. Proc. 2019-48 that you should be aware of.
The High-Low Substantiation Method Explained 🏙️
The “high-low” method is a simplified way to handle per diem rates for travel within the continental United States (CONUS). Instead of looking up the specific per diem rate for every single city you visit, the IRS designates certain locations as “high-cost.”
- If you travel to a location on the high-cost list, you use the higher rate of $319 per day.
- For travel to any other city within CONUS, you use the lower rate of $225 per day.
This rate covers lodging, meals, and incidental expenses. The IRS also specifies the portion of this rate that is treated as being for meals and incidental expenses (M&IE). This is important for employers and self-employed individuals because the deduction for meals is often subject to a 50% limitation under § 274(n) of the tax code.
📝 Meal & Incidental Expense (M&IE) Portion
• For high-cost localities: $86 of the $319 rate is for M&IE.
• For all other localities: $74 of the $225 rate is for M&IE.
Which Locations Are “High-Cost”? 🗺️
This is a critical question for using the high-low method correctly. The good news is that Notice 2025-54 states there were no changes to the list of high-cost localities from the previous year. However, it’s crucial to pay attention to the dates, as many locations are only considered high-cost during their peak tourist or business seasons.
Here are a few examples to give you an idea of how it works. This is NOT the complete list!
| Key City | County/Location | High-Cost Period |
|---|---|---|
| Los Angeles, CA | Los Angeles, Orange, Ventura counties | October 1 – September 30 (All Year) |
| New York City, NY | The 5 boroughs (Bronx, Kings, NY, Queens, Richmond) | Oct 1-Dec 31 & Mar 1-Sep 30 |
| Chicago, IL | Cook and Lake counties | Oct 1-Nov 30 & Apr 1-Sep 30 |
| Vail, CO | Eagle county | October 1 – September 30 (All Year) |
| Washington, D.C. | D.C. and surrounding counties in MD & VA | October 1 – September 30 (All Year) |
Always double-check the official list in Notice 2025-54 for the specific dates and counties. A city like Phoenix/Scottsdale, for example, is only considered high-cost from February 1 to March 31. Traveling there in May would put you in the “other locality” category.
Special M&IE Rates for the Transportation Industry 🚚✈️
The IRS provides special M&IE (Meals and Incidental Expenses) rates for taxpayers in the transportation industry. This is a specific rule designed for pilots, truck drivers, and others who travel constantly as part of their job.
These rates are simpler and don’t depend on the specific city you’re in. For the 2025-2026 period, the rates are:
- $80 per day for any locality of travel within the continental United States (CONUS).
- $86 per day for any locality of travel outside the continental United States (OCONUS).
This simplified rate helps truckers and other transportation professionals who may pass through multiple states and cities in a single day, making it impractical to use location-specific rates.
2025-2026 Per Diem At-a-Glance
Frequently Asked Questions ❓
Staying on top of these annual updates from the IRS is essential for smooth and accurate business operations. By understanding and applying these new per diem rates, you can simplify your expense reporting and ensure you’re in full compliance.
I hope this breakdown makes the new per diem rates clear! If you have any more questions about Notice 2025-54 or business travel expenses, feel free to drop a comment below! Happy travels! ✈️
