As of Oct. 1, the IRS has raised the special per diem rates taxpayers must use to substantiate ordinary and necessary business travel expenses away from home. Full guidance for the changes is provided in IRS Notice 2022-44. The notice includes rates for the incidental expenses-only deduction, high-cost localities, and transportation industry meal and incidental expenses.
Generally, taxpayers may consider substantiated for federal tax purposes employees’ expenses incurred for employment-related travel in an amount equaling or up to the federal per diem rate for the travel locality. The high-low substantiation method applies a higher rate to what the IRS deems “high-cost” localities and a lower rate to all other localities.
The new per diem rate under the high-low substantiation method for travel within the continental United States (CONUS) is $204 for non-high-cost localities. The rate for travel to high-cost localities within CONUS is $297.
This represents a small increase over the previous rates (for the period Oct. 1, 2021, to Sept. 30, 2022), which were $202 and $296, respectively. The portion of the rates treated as paid for meals for purposes of Sec. 274(n) remain the same — $74 for high-cost localities and $64 for all others.
The notice also includes a revised list of high-cost localities for the period Oct. 1, 2022, to Sept. 30, 2023, during which the new rates are in effect. High-cost localities have a federal per-diem rate of $250 or more.
This year’s notice also provides special rates for the transportation industry. The rate for meals and incidental expenses remains the same as the previous period — $69 for travel localities within CONUS, and $74 for those outside CONUS. For travel both in and outside CONUS, the incidental expenses-only rate continues to be $5 per day.
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