Employees who travel out-of-town for business typically have their expenses reimbursed by their employer. If properly documented, such reimbursements are tax-free to the employee.
Employees can keep track of all their actual expenses while traveling and submit a detailed expense report to their employer for reimbursement. However, this requires a lot of record keeping.
There is a less time-consuming alternative: using a standard per diem allowance to cover meals, lodging, and incidental expenses. These rates are based on the per diem rates the federal government pays its workers while traveling. You can find them at www.gsa.gov (look for the link to “Per Diem Rates”).
The rates vary from locality to locality. However, to make things even simpler, employers can use an optional “high-low method.” With this method, there is one uniform per-diem rate for all “high-cost” areas within the continental United States and another rate for all other areas. These rates are adjusted for inflation each year.
Starting October 1, 2016, the high-cost-area per diem rate is $282 (up from $275)—this includes $214 for lodging and $68 for meals and incidental expenses. The per-diem rate for all other areas is $189 (up from $185), consisting of $132 for lodging and $57 for meals and incidental expenses. (Notice 2015-63, Sec. 5 ; Notice 2016-58, Sec. 5 )
This is related to employee rates. As we’ve previously discussed, self-employed individuals can deduct many of their business travel expenses.
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MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.