The IRS has announced the special per diem rates that taxpayers may use to reimburse employees for expenses incurred during travel after September 30, 2017. The IRS announces new rates each year around the end of September.
New rates. The IRS-approved per diem rate for high-cost areas is $284 (up from $282 for the previous per diem). The IRS-approved per diem rate for all other areas is $191 (up from $189). The rates apply to per diem allowances paid for travel as of October 1, 2017. Within these overall high-low per diem rates:
the rate paid for purposes of the meals/incidental expense (M&EI) limitation is $68 for travel to any high-cost locality and $57 for travel to any other locality within CONUS; and
the rate for the incidental expenses only deduction remains at $5 per day for post-September 30, 2017 travel (those individuals who do not pay or incur meal expenses for a calendar day of travel away from home may deduct $5 per day for each day away from home).
Federal travel regs issued by the General Services Administration (GSA) in 2011 describe “incidental expenses” to generally include fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships.
Comment. As in past years, the employee must still substantiate to the payer the elements of time, place, and business purpose.
High-cost areas. The latest IRS announcement also contains a list of “high-cost” areas, revised from its list last year:
- The following localities have been added to the list of high-cost localities: Oakland, California; Lewes, Delaware; Fort Myers, Florida; Hyannis, Massachusetts; Petoskey, Michigan; Portland, Oregon; Vancouver, Washington.
- The following localities have changed the portion of the year in which they are high-cost localities: Aspen, Colorado; Denver/Aurora, Colorado; Telluride, Colorado; Vail, Colorado; Bar Harbor, Maine; Ocean City, Maryland; Nantucket, Massachusetts; Philadelphia, Pennsylvania; Jamestown/Middletown/Newport, Rhode Island; Jackson/Pinedale, Wyoming.
- The following localities have been removed from the list of high-cost localities: Sedona, Arizona; Los Angeles, California; Vero Beach, Florida; Kill Devil, North Carolina
Effective dates. The new per diem allowances are effective for lodging, meal and incidental expenses, or for meal and incidental expenses only, paid to any employee on or after October 1, 2017, for travel away from home on or after October 1, 2016.
For travel during the last three months of the calendar year, a payor must continue to use the same method (per diem method, or high-low method) for an employee as the payor used during the first nine months of the calendar year. The payor may use either the rates and high-cost localities in effect for the first nine months of the calendar year or the updated rates and high-cost localities in effect for the last three months of the calendar year as long as the payor uses the same rates and localities consistently for all employees reimbursed under the high-low method.