
On Sept. 20, the IRS released Notice 2024-68, which sets the 2024-2025 special per diem rates for taxpayers to substantiate the amount of ordinary and necessary business expenses incurred while traveling away from home.
CPA Practice Advisor reports that beginning Oct. 1, the per diem rates utilized to calculate tax deductions for individuals who travel for business have been set at $319 for any high-cost locality and $225 for travel to low-cost destinations. Every year, the agency sets special per diem rates for taxpayers to substantiate the expenses for accommodations as well as meals and other incidental expenses (M&IE) on business trips.
According to the IRS, the annual notice specifically states the per diem rates used to substantiate the amount for business travel expenses. These are the special transportation industry M&IE rates, the rate for the incidental expenses only deduction and the rates and list of high-cost localities for the high-low substantiation method.
Journal of Accountancy reported that in general, in using the per diem substantiation method, if a company gives a per diem allowance instead of paying for an employee's actual expenses for accommodations and M&IE expenses during travel, the amount that is deemed as substantiated for each calendar day is the lesser of the allowance amount for that day or the amount computed according to federal per diem rates for a specific travel destination within the continental U.S.
Meanwhile, a separate federal rate applies to per diem allowances just for M&IE. Taxpayers utilizing the rates and the list of localities in Notice 2024-68 must comply with the per diem substantiation method rules in Rev. Proc. 2019-48, Journal of Accountancy said.
According to the IRS, Rev. Proc. 2019-48 is a revenue procedure providing rules for using a per diem rate to substantiate the amount of an employee’s expenses for lodging and M&IE expenses or M&IE only that an employer reimburses.
The IRS does not require using the per diem rate to substantiate the amount of ordinary and necessary travel business expenses. Instead, a taxpayer can substantiate actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence, CPA Practice Advisor reported.
The special M&IE rates for taxpayers in the transportation industry starting Oct. 1 are $80 for any locality in the continental U.S. and $86 for any travel locality outside the continental U.S., increasing from $69 and $74, respectively, in Notice 2023-68.
For purposes of the high-low substantiation method, the per diem rates are $319 for travel to any high-cost locality and $225 for travel to any other locality within the continental U.S., increasing from $309 and $214, respectively, which were the rates prescribed in Notice 2023-68.
The $319 high rate and $225 low rate are treated as paid for M&IE, which is $86 for travel to any high-cost locality and $74 for travel to any other locality within the continental U.S., up from $74 and $64, respectively.
Notice 2024-68 also enumerates the high-cost localities with a federal per diem rate of $272 or more from Oct. 1 to Sept. 30, 2025.