IRS Announces Special Per Diem Rates
The IRS recently released Notice 2025-54, providing that the special per diem rates by which taxpayers may substantiate ordinary and necessary business expenses of travel starting Oct. 1 will remain the same as the previous year.
Generally, a payer may consider substantiated for federal tax purposes an employee's expenses incurred for employment-related travel in an amount up to or equaling the federal per diem rate for the locality of travel in lieu of actual expenses incurred. A different federal rate applies to per diem allowances for meals and incidental expenses only. Taxpayers using Notice 2025-54 must comply with the rules for the per diem substantiation method described in Rev. Proc. 2019-48.
The annual update includes the per diem rate under the high-low substantiation method for travel within the continental United States (CONUS). For non-high-cost localities, the rate will remain $225. The rate for high-cost localities within the CONUS will remain $319. The share of the rates treated as paid-for meals for purposes of Sec. 274(n) will remain at $86 for high-cost CONUS localities and $74 for all other CONUS localities.
In addition, the notice amends the list of high-cost localities for the new annual period of Oct. 1, 2025, to Sept. 30, 2026. High-cost localities have a federal per diem rate of $272 or more.
The notice also specifies the special rates for taxpayers in the transportation industry. The meals and incidental expenses rates will be unchanged from their current rates of $80 for any locality of travel within the CONUS and $86 for localities of travel outside the CONUS.
The incidental-expenses-only rate will remain at $5 per day for travel both in and outside the CONUS.