IRS Introduces Per Diem Rates Effective October 2018 by Dustin Grizzle
Posted on November 27, 2018 by Dustin Grizzle
The IRS issued its annual update to the daily rates that employers may use to reimburse employees for lodging, meals and other incidental expenses that workers incur while traveling for business purposes.
The per diem rates are fixed amounts that employers may use to more easily reimburse workers for ordinary and necessary business travel expenses without requiring the collection and calculation of actual costs incurred. These payments are not considered taxable income to employees as long as workers substantiate their claims with detailed expenses reports. However, should a business reimburse an employee for more than the per diem rate, the employee is responsible for paying taxes on that amount.
Effective Oct. 1, 2018, the per diem meal and incidental allowances for taxpayers in the transportation industry are $66 within the continental U.S. and $71 for travel outside of the region. These expenses include all meals, laundry and dry cleaning services, and tips provided to food servers, porters, baggage handlers and other hotel employees.
For purposes of the high-low substantiation method, the per diem rates are $287 for travel to a high-cost locality and $195 for travel to any other locality within the continental U.S. The per diem rates for solely meals and incidental expenses is $71 for travel to high-cost localities and $60 for any other area within the continental U.S. In addition, the IRS updated its list of localities, including New York City, San Francisco and Aspen, Colo., which have a high cost of living during all or a portion of the year and therefore have a federal per diem rate of $241 or more.
The per diem rates are especially important to workers in 2018 because the Tax Cuts and Jobs Act eliminates their ability to deduct unreimbursed job expenses and miscellaneous itemized deductions through 2025. Therefore, it behooves workers to speak with their employers and request reimbursements for those business-travel expenses in order to recoup even a portion of the money they personally lay out to pay for costs that are necessary for their jobs.
About the Author: Dustin Grizzle is an associate director of Tax Services with Berkowitz Pollack Brant, where he provides corporate structuring, tax-planning and compliance services to real estate developers, management firms and investment companies; manufacturing businesses with large inventories; and high-net-worth families. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or via email at email@example.com.
Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.