The special per diem rates that a taxpayer uses in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home under the per diem substantiation method (set out in Rev. Proc. 2019-48) will be higher starting Oct. 1, as provided by the IRS in Notice 2023-68.
In general, under the per diem substantiation method, if an employer or other payer pays a per diem allowance in lieu of reimbursing an employee’s actual expenses for lodging, meals, and incidental expenses, the amount deemed substantiated for each calendar day is the lesser of the allowance amount for that day or the amount computed under federal per diem rates for the place of travel within the continental United States (CONUS). A separate federal rate applies to per diem allowances just for meals and incidental expenses (M&IE). Taxpayers using the rates and the list of localities in Notice 2023-68 must comply with the rules for the per diem substantiation method in Rev. Proc. 2019-48.
The high-low substantiation method applies a higher rate to designated high-cost localities and a lower rate to all other localities. The annual update includes the per diem rate under the high-low substantiation method for travel within the continental United States (CONUS).
The rate for travel to high-cost localities within CONUS is $309; the rate for non-high-cost localities will be $214. The current rates for the period Oct. 1, 2022, to Sept. 30, 2023, are, respectively, $297 and $204. The portion of the rates treated as paid for meals for purposes of Sec. 274(n) is $74 for high-cost CONUS localities and $64 for all other CONUS localities, both the same as this year and the previous year.
The notice revised the list of high-cost localities for the upcoming new annual period (Oct. 1, 2023, to Sept. 30, 2024) for which the new rates are in effect. High-cost localities have a federal per-diem rate of $261 or more. Notably, Los Angeles, Calif., and Portland, Ore., have been removed from the list of high-cost localities for the new period.
The notice also provides the special rates for taxpayers in the transportation industry. The meals and incidental expenses rates are $69 for any locality of travel within CONUS and $74 for localities of travel outside CONUS, both the same as the current rates.
The rate for incidental expenses remains $5 per day, for travel in and outside CONUS.