IRS Per Diem Rates: How Fixed Allowances Simplify Business Travel Receipts

What Is Per Diem and Why Does It Matter for Receipts?

If you travel for business, you already know the documentation headache: saving every restaurant receipt, tracking every hotel bill, logging every incidental expense. It’s tedious, error-prone, and one lost receipt can mean a lost deduction.

Per diem rates offer a simpler alternative. Instead of tracking every individual expense, you use a fixed daily allowance set by the federal government. For meals, this means you can skip individual receipts entirely — you just need to document where you went, when, and why.

In this guide, we’ll break down exactly how per diem works, who can use it, which method saves you the most money, and what documentation you still need to keep. For the full picture of what the IRS requires for receipts in general, see our comprehensive guide to IRS receipt requirements.

How Per Diem Rates Work

The Basic Concept

Per diem (Latin for “per day”) is a fixed daily allowance that covers lodging, meals, and incidental expenses (M&IE) during business travel. Instead of tracking actual costs, you use the government-published rate for the location you’re visiting.

The IRS allows businesses to use per diem rates established by two federal agencies:

• General Services Administration (GSA): Sets rates for travel within the continental United States (CONUS)
• Department of State: Sets rates for international travel (OCONUS)

GSA CONUS Per Diem Rates

GSA rates vary by location and are updated annually (the fiscal year runs October 1 through September 30). You can look up current rates at gsa.gov/travel/plan-book/per-diem-rates.

Each location’s per diem has two components:

1. Lodging rate: The maximum allowable amount for a hotel room
2. M&IE rate: A fixed amount for meals and incidental expenses (tips, laundry, etc.)

For fiscal year 2025, the standard CONUS rate (used for locations without a specific listing) is $110 for lodging and $68 for M&IE. High-cost cities like New York, San Francisco, and Washington D.C. have significantly higher rates.

Department of State Rates for International Travel

If your business travel takes you outside the continental U.S., you’ll use rates published by the Department of State’s Office of Allowances. These rates are updated monthly and vary widely by country and city.

The Two Per Diem Methods

The IRS recognizes two per diem calculation methods. Choosing the right one depends on where and how often you travel.

Method 1: Regular Per Diem (Location-Specific Rates)

Under the regular method, you use the specific GSA rate for each city you visit. If you travel to three different cities on one trip, you’d use three different rates.

Pros:

• Higher rates for expensive cities mean larger deductions when traveling to high-cost areas
• More accurately reflects actual cost variations

Cons:

• More complex to calculate, especially for multi-city trips
• Requires looking up individual city rates

Method 2: High-Low Per Diem (Simplified)

The high-low method simplifies things by using just two rates: one for “high-cost” localities and one for everywhere else. The IRS publishes a list of designated high-cost areas each year in a Revenue Procedure or IRS Notice.

For the current fiscal year, the rates are:

Pros:

• Much simpler — only two rates to remember
• Easier for businesses with employees traveling to many different locations

Cons:

• May result in a lower deduction for very expensive cities where the GSA-specific rate is higher than the high-low “high-cost” rate

Important: Once you choose a method for a calendar year, you must use it consistently for that entire year. You can’t switch between regular and high-low on a trip-by-trip basis.

Who Can Use Per Diem?

This is where per diem gets nuanced — and where many people get tripped up.

Employees

Employees can use per diem for both lodging and meals. An employer can reimburse an employee at the full per diem rate (lodging + M&IE) under an accountable plan, and neither the employer nor the employee needs to save individual receipts for amounts within the per diem limits.

Self-Employed Individuals

Self-employed individuals can use per diem for meals only — not for lodging. This is a critical distinction. If you’re a sole proprietor, freelancer, or independent contractor:

• Meals and incidental expenses: You can use the M&IE per diem rate instead of tracking individual meal receipts
• Lodging: You must track actual expenses and keep hotel receipts

This limitation makes per diem less of a silver bullet for self-employed travelers, but the meal portion alone can still save significant recordkeeping effort. For more on what self-employed filers need to document, see our Schedule C receipt requirements guide.

What You Still Need to Document

Per diem eliminates the need for individual meal receipts, but it does not eliminate documentation requirements entirely. Even when using per diem, you must substantiate:

1. Time: The dates of your travel (departure and return)
2. Place: The destination(s) of your travel
3. Business purpose: Why you traveled (client meeting, conference, site visit, etc.)

These are the same elements required under IRS Publication 463 for all business travel. Per diem only replaces the need to document the amount element — the other three elements still require records.

A simple travel log that includes dates, destinations, and business purpose for each trip is sufficient. Keep this contemporaneously — meaning at or near the time of travel, not reconstructed months later.

Per Diem vs. Actual Expenses: When Each Method Wins

Choosing between per diem and actual expense tracking isn’t just about convenience — it can significantly impact your deduction amount.

When Per Diem Is Better

• Your actual meal costs are below the per diem rate. If you eat modestly while traveling, the per diem rate might give you a larger deduction than your actual expenses.
• You travel to locations with high per diem rates. Cities like New York ($86 M&IE) and San Francisco ($86 M&IE) have generous meal allowances.
• You value simplicity. If tracking individual meal receipts is a significant burden, per diem’s time savings may outweigh a slightly smaller deduction.
• You frequently lose receipts. Per diem eliminates the risk of lost meal documentation.

When Actual Expenses Are Better

• Your actual meal costs exceed the per diem rate. If you’re entertaining clients at high-end restaurants, actual expenses will usually yield a larger deduction (assuming you have proper documentation per the business meal receipt requirements).
• You travel to locations with low per diem rates. Some areas have M&IE rates as low as $59. If your actual costs are higher, tracking receipts pays off.
• You already have a good receipt tracking system. If capturing meal receipts is easy for you, there’s less incentive to switch to per diem.

A Quick Comparison

The 50% Deduction Limit on Meal Per Diem

Whether you use per diem or track actual expenses, business meal costs are generally subject to a 50% deduction limit. This means if your per diem M&IE rate is $68 per day, you can only deduct $34 per day for tax purposes.

There are limited exceptions to this rule (meals provided to employees on business premises, for example), but for most business travelers, the 50% limit applies regardless of which method you choose.

For employers using per diem to reimburse employees: the employer claims the full reimbursement as a business expense but is subject to the 50% limit on the meal portion of the per diem. The lodging portion is fully deductible.

Partial Day Per Diem: First and Last Day of Travel

You don’t get the full M&IE rate for partial travel days. The IRS allows 75% of the applicable M&IE rate for the first and last day of business travel. For a location with a $68 M&IE rate, that means $51 for departure and arrival days.

As discussed in our guide to the IRS $75 receipt rule, different thresholds and rules apply in different receipt contexts — don’t confuse the 75% partial-day per diem with the $75 receipt threshold.

Incidental Expenses: What’s Included

The M&IE rate covers more than just meals. “Incidental expenses” include:

• Tips to porters, baggage carriers, and hotel staff
• Transportation between places of lodging or business and places to eat
• Mailing costs for filing travel vouchers and paying employer-sponsored charge card billings

Incidental expenses do not include taxi fares, airfare, car rentals, or other transportation costs. Those must be tracked separately with actual receipts.

Per Diem for Employers: Setting Up an Accountable Plan

If you’re an employer reimbursing employees at per diem rates, the reimbursement must be made under an accountable plan to avoid being treated as taxable wages. An accountable plan requires:

1. Business connection: The expenses must have a business purpose
2. Substantiation: Employees must substantiate time, place, and business purpose (but not amounts, since you’re using per diem)
3. Return of excess: Any amounts paid in excess of per diem that aren’t substantiated must be returned within a reasonable time

Per diem reimbursements under an accountable plan are not reported as income on the employee’s W-2 (assuming they don’t exceed the federal rate).

Common Per Diem Mistakes to Avoid

1. Using Per Diem for Local Meals

Per diem is for business travel only. You can’t use per diem rates for business meals in your home city. Those require actual receipts and documentation of business purpose and attendees.

2. Forgetting the Travel Log

Per diem eliminates meal receipts but not travel documentation. Without a log showing dates, destinations, and business purpose, your per diem deductions are vulnerable in an audit.

3. Mixing Methods Mid-Year

You must use the same per diem method (regular or high-low) for the entire calendar year. Switching mid-year is not permitted.

4. Self-Employed Filers Using Per Diem for Lodging

This bears repeating because it’s such a common error: self-employed individuals cannot use per diem for lodging. You must track actual hotel costs and keep receipts.

5. Not Adjusting for Employer-Provided Meals

If your employer or a conference provides meals, you must reduce the M&IE rate for those meals. The IRS publishes a breakdown showing how much of the M&IE rate is allocated to breakfast, lunch, dinner, and incidentals.

Practical Implementation

Here’s a straightforward system for using per diem effectively:

1. Before each trip: Look up the per diem rate for your destination on GSA.gov
2. During the trip: Log the date, destination, and business purpose each day (a simple spreadsheet or note works fine)
3. Keep lodging receipts: Even though you’re using per diem for meals, you still need actual lodging receipts (especially if self-employed)
4. Keep transportation receipts: Airfare, car rental, parking, and other transportation costs are tracked separately
5. At year-end: Calculate your per diem deduction by multiplying the applicable M&IE rate by the number of full and partial travel days, then apply the 50% meal deduction limit

For the non-per-diem receipts you still need to track (lodging, transportation, etc.), a tool like SparkReceipt can help you scan and organize everything so your travel documentation stays complete without the hassle of managing paper.

The Bottom Line

Per diem rates are one of the most underused tools in the business traveler’s tax toolkit. They simplify meal documentation, reduce audit risk (the IRS can’t argue with its own published rates), and in some cases actually increase your deduction over actual expenses.

But per diem isn’t a free pass to ignore recordkeeping entirely. You still need to document the time, place, and business purpose of every trip. And for self-employed filers, lodging still requires actual receipts.

The smartest approach? Understand when per diem benefits you, use it strategically for meals during business travel, and maintain solid documentation for everything else.

Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Per diem rates and rules change annually. Always verify current rates at GSA.gov and consult a qualified tax professional for advice specific to your situation. SparkReceipt provides tools for receipt management and expense tracking but does not provide tax advice.