Special Per Diem Rates

Post Date: 9/21/15
Last Updated: 9/18/15


Cross References
- Notice 2015-63

Each year the IRS updates the special per diem rates for taxpayers to use in substantiat- ing the amount of ordinary and necessary business expenses incurred while traveling away from home. These special per diem rates apply to the following:
- The special transportation industry meal and incidental expenses (M&IE) rates,
- 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.

Special M&IE rates for transportation industry. For workers subject to the U.S. Department of Transportation “hours of service” rules, a deduction of 80% for meals is allowed (compared to the general 50% limitation). The “hours of service” rule in general limits the number of hours per day a worker can work. This can include individuals working on an airline, barge, bus, ship, train, or truck. In addition to a higher limit for deducting meals, transportation workers also have their own special standard meal and incidental expense (M&IE) rates:
Effective 10/1/2014 10/1/2015
M&IE, continental U.S. (CONUS) $59 $63
M&IE, outside continental U.S. (OCONUS) $65 $68

Rate for incidental expenses only deduction. Revenue Procedure 2011-47 revised the definition of incidental expenses to include only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. These costs may be separately deducted or reimbursed from other travel costs. Effective October 1, 2015, the rate for the incidental expenses-only deduction is $5 per day.

High-low substantiation method. The high-low substantiation method can be used by employers to pay employees a per diem travel allowance (hotels, meals, and incidentals) instead of using various rates that apply at different locations. By using this special per diem rate method, only two rates apply in the Continental United States (CONUS). The special high-low method is used only by employers to reimburse employees for their travel expenses. It cannot be used by employees or self-employed taxpayers to determine their unreimbursed business expense deductions. Employer reimbursements within these limits are considered substantiated.

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