Business travelers have a lot of expenses to keep track of, including hotels, restaurants and transportation.
Companies generally use one of two methods to pay for travel-related expenses: reimbursement of actual expenses, which requires the business traveler provide receipts to report the actual cost and then request reimbursement; or the IRS-allowed per diem rates, which are daily allowances to compensate for lodging, meals and incidental expenses incurred on business trips.
IRS per diem rates are updated annually. The IRS provided the new rates in effect from Oct. 1, 2018, to Sept. 30, 2019 in Notice 2018-77.
- The per diem rate for travel to any high-cost location is $287, up from $284 last year. High-cost locations are listed on pages 3-6 of Notice 2018-77 .
- Travel to any other location (low-cost) is now $195, up from $191 last year.
- Incidental expense allowances remain at $5 per day for any location. Incidental expenses include fees and tips given to porters, baggage carriers, hotel staff and staff on ships.
- The amount of the $287 high rate and $195 low rate that is treated as paid for meals is $71 for travel to any high-cost locale and $60 for travel to any other location.
The special meals and incidental expenses rates for taxpayers in the transportation industry are $66 for any location within the Continental U.S. and $71 for any location of travel outside the Continental U.S., both of which are $3 higher than last year.
Impact of Tax Cuts and Jobs Act
Employers should keep in mind that employees will no longer be able to deduct work-related expenses on their 2018 tax returns. Prior to the Tax Cuts and Jobs Act, which went into effect Jan. 1, unreimbursed work-related travel expenses were generally deductible on an employee’s individual tax return (subject to a 50 percent limit for meals and entertainment) as a miscellaneous itemized deduction. The TCJA suspends miscellaneous itemized deductions subject to the 2 percent of AGI floor for tax years 2018-2025, which means adequate business travel expense reimbursements are now more important to employees.