IRS Raises Special Per Diem Rates for Business Travel
New Business Travel Per Diem Rates Effective on October 1
Effective October 1, 2025, the Internal Revenue Service (IRS) has increased the special per diem rates that taxpayers can use to substantiate travel and business expenses. This adjustment (Notice 2025-54) is designed to reflect the rising costs of lodging, meals, and incidental expenses associated with business travel.
Key Takeaways
Effective Date: The rates are effective for allowances paid and expenses incurred on or after October 1, 2025.
Incidental Expenses: The rate for incidental expenses alone is a flat $5 per day.
No Changes to High-Cost List: The list of high-cost localities is the same as the list published in Notice 2024-68.
Compliance: Taxpayers must follow the rules set forth in Rev. Proc. 2019-48 to properly use these per diem rates for substantiation.
Understanding Per Diem Rates
Per diem rates are daily allowances that employers can provide to employees to cover the costs of travel-related expenses. These rates can be used to substantiate expenses without requiring detailed receipts. The IRS sets specific per diem rates for different locations and categories of expenses.
The High-Low Substantiation Method
One method of determining per diem rates is the high-low substantiation method. This method applies a higher rate to designated high-cost localities and a lower rate to all other areas. For travel within the continental United States (CONUS), the new rates under this method are:
- High-cost localities: $319 per day
- Non-high-cost localities: $225 per day
The portion of these rates allocated to meals and incidental expenses (M&IE) has also increased:
- M&IE High-cost localities: $86
- M&IE Non-high-cost localities: $74
Transportation Industry Rates
The IRS also provides special per diem rates for taxpayers in the transportation industry. These rates are:
- CONUS: $80 per day for M&IE
- Outside CONUS: $86 per day for M&IE
By understanding the new per diem rates and the rules governing their use, taxpayers can ensure that their business travel expenses are properly documented and claimed on their tax returns.
Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.
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