global Tax Per Diem Rates 2025–2026: IRS Keeps Business Travel Allowances Unchanged September 30, 2025 Keeping up with receipts can be a daunting task, especially when traveling on business. Per diem rates, or fixed allowances for lodging and meals, could be the solution. The IRS has announced that 2025–2026 rates remain unchanged from last year. Per Diem ExplainedBusiness travel involves tracking a range of expenses: hotels, meals, tips, and more. To make things simpler, the IRS allows employers to use per diem rates, which are daily allowances covering lodging, meals, and incidental expenses (such as tips for porters, baggage carriers, and hotel staff).Key Considerations:Rates vary by location. Different allowances apply depending on where employees travel.Simplified policy setting. Using per diem rates provides a clear framework for travelers and makes expense policies easier for employers to administer.Tax benefits. Per diem payments aren’t treated as taxable wages as long as employees provide expense reports and the payments don’t exceed the federal rates. “Per diem rates are one of the simplest tools employers can use to keep travel expense policies clear, consistent, and IRS-compliant. Even though the rates haven’t changed this year, it’s important to review your policies annually to make sure you’re applying them correctly.” - Mitchell Halpern This Year’s Rates (Effective October 1, 2025)The IRS uses a high–low substantiation method to set flat rates for travel within the continental United States (CONUS). Designated high-cost localities receive a higher per diem amount, while all others are treated as low-cost localities.For travel between October 1, 2025, and September 30, 2026 (Notice 2025-54):High-cost localities: $319 per day (unchanged)Other localities: $225 per day (unchanged)Meals & incidental expenses (M&IE) portion:$86 for high-cost localities (unchanged)$74 for all other localities (unchanged)Incidental-only allowance: $5 per day for any location (unchanged)Transportation industry M&IE rates:$80 for CONUS travel (unchanged)$86 for travel outside CONUS (unchanged)High-cost localities are those with a federal per diem rate of $272 or more. The IRS updates the list annually.What Areas are Considered “High Cost”?The IRS revised its list of high-cost localities for the new annual period in Notice 2025-54. Employers should check this list to determine which destinations qualify for the higher rate.Compliance MattersWhile per diem rates simplify recordkeeping and reduce the need for receipts, the IRS closely monitors business travel expenses. Misuse can lead to disallowed deductions and potential penalties.Also, under current tax law, business travel expenses are no longer deductible as itemized deductions for employees, making accurate reporting even more important.For help setting travel policies or ensuring compliance with the substantiation rules under Rev. Proc. 2019-48, talk to your tax advisor.FAQsDo employees need to submit receipts when using per diem rates? No. Receipts aren’t required if per diem rates are used correctly, but employees must still submit a timely expense report documenting the time, place, and business purpose of the travel.Can employers pay less than the federal per diem rate? Yes. Employers may set lower rates if desired, but they can’t exceed the federal rates without treating the excess as taxable wages.Are per diem payments taxable to employees? Not if they don’t exceed the federal rates and employees properly document their travel. Excess amounts are subject to income and payroll taxes.What if an employee travels to multiple cities in one trip? Employers should apply the applicable per diem rate for each location based on where the employee stays overnight.How often does the IRS update per diem rates? Annually. New rates generally take effect October 1 each year and are published in an IRS notice (this year’s is Notice 2025-54).
