New Per Diem Rates Just Kicked In: What You Can Deduct for Business Travel Now
Business travel does not need to create a pile of receipts and questions.
Starting October 1, 2026, the IRS has updated its per diem rates for business travel in the continental United States. The new rates apply through September 30, 2027, under IRS Notice 2026-60.
Per diem gives you an optional way to substantiate certain travel expenses. Instead of tracking every individual meal and incidental expense, you may be able to use the IRS-approved daily rate.
It is one less thing to track.
The important part is setting it up correctly. I will walk you through the new amounts, who can use them, and what records you still need to keep.
The new 2026–2027 per diem rates
The IRS high-low substantiation method uses two daily rates:
Travel location | Total per diem rate | Meals and incidental expenses portion |
High-cost locality | $329 per day | $86 per day |
All other CONUS localities | $230 per day | $74 per day |
These rates increased from the prior year:
The high-cost rate increased from $319 to $329.
The standard rate increased from $225 to $230.
The meals-and-incidental-expenses portion remains part of the total rate.
The incidental-expenses-only rate remains $5 per day.
The total high-low rate is designed to cover lodging, meals, and incidental expenses for eligible business travel.
The meals-and-incidental-expenses, or M&IE, amount can be used when you are using a method that covers meals and incidentals only. It does not cover lodging.
What does per diem mean?
Per diem is a daily allowance used to substantiate certain business travel expenses.
The IRS sets the rates. Your business may then use those rates instead of collecting and calculating every individual qualifying expense.
That does not mean the IRS is automatically paying you $329. It also does not mean every business traveler receives that amount.
Per diem is an optional substantiation method. It helps determine the amount of eligible travel expenses. Your business still needs a valid business reason for the trip.
For example, you may travel to another city to:
Meet with a client.
Attend a business conference.
Visit a supplier.
Complete work at a customer location.
Attend business training.
Meet with a professional service provider.
The trip must be ordinary and necessary for your business. Personal travel does not become deductible simply because you use a per diem amount.
Who can use the high-low method?
The answer depends on how your business operates.
Employers reimbursing employees
An employer may use per diem rates to reimburse employees for eligible business travel.
When the reimbursement is handled through a properly structured accountable plan, the employee can generally be reimbursed using per diem for both:
Lodging.
Meals and incidental expenses.
The employee still needs to provide basic information about the travel. The employer should know when the employee traveled, where the employee went, and why the trip was business-related.
The employee may not need to submit every meal receipt when the company uses the approved per diem method. That is the main convenience.
Self-employed business owners
Sole proprietors and single-member LLC owners need to follow a different rule.
A self-employed individual may use the high-low method for meals and incidental expenses.
For lodging, however, the self-employed individual must use actual lodging expenses. The high-low per diem rate cannot be used to claim a lodging deduction in place of the actual hotel or lodging cost.
This distinction is important.
A self-employed business owner may generally track:
The actual hotel or lodging expense.
The applicable M&IE per diem amount.
The time, place, and business purpose of the trip.
The total $329 or $230 high-low amount should not simply be used as a lodging deduction on a sole proprietor’s tax return.
If you are unsure which rule applies to your business structure, I recommend reviewing the method with your tax professional before putting it into practice.
First and last travel days are different
The first and last day of business travel are generally reimbursed at 75% of the applicable per diem rate.
Here is what that looks like under the new rates:
High-cost locality
Full daily rate: $329.
First or last day at 75%: $246.75.
M&IE portion: $86.
First or last day M&IE at 75%: $64.50.
All other CONUS localities
Full daily rate: $230.
First or last day at 75%: $172.50.
M&IE portion: $74.
First or last day M&IE at 75%: $55.50.
This matters when a trip crosses multiple days.
For example, if you leave on Monday and return on Wednesday, Monday and Wednesday are generally partial-rate days. Tuesday is the full daily rate, assuming you were away from home for the full day and otherwise met the requirements.
A simple travel log can make this calculation routine.
Check whether the destination is high-cost
The high-cost rate does not apply everywhere.
The IRS defines high-cost localities and specifies when those higher rates apply. The threshold for a high-cost locality increased to $280, up from $270.
Some destinations were added. Some were removed. Several destinations have different seasonal dates than they did under the prior notice.
For example, the updated list includes changes involving destinations such as:
Tucson, Arizona.
San Mateo, Foster City, and Belmont, California.
Albuquerque, New Mexico.
Cody, Wyoming.
The list also includes seasonal changes for several localities. A destination may qualify as high-cost during one part of the year but use the standard rate during another part.
Before applying the $329 rate, check the current high-cost locality list in IRS Notice 2026-60. Confirm both the destination and the travel dates.
This quick check can prevent an incorrect reimbursement amount.
What records do you still need?
Per diem simplifies the amount. It does not eliminate recordkeeping.
You still need to substantiate the basics:
Time: When did the business travel begin and end?
Place: Where did you travel?
Business purpose: Why was the trip necessary for your business?
You should also keep supporting information such as:
Travel dates.
Destination.
Client, conference, project, or business activity.
Transportation records.
Hotel receipts when actual lodging is required.
A record of meals provided by an employer, conference, or another party.
Any personal days added to a business trip.
A bank statement may show that you paid for a hotel. It does not always explain why the trip was business-related.
A short note is often enough. For example:
October 12–14: Traveled to Seattle to meet with client regarding project planning and contract renewal.
That is much more useful than a transaction labeled only “travel.”
The IRS explains the broader recordkeeping standard in its guidance on recordkeeping for small businesses.
Remember the meals deduction limit
The M&IE amount is the part of the per diem related to meals and incidental expenses.
Business meals are generally subject to a 50% deduction limitation when they otherwise qualify. The per diem method helps substantiate the amount. It does not automatically remove the applicable deduction limit.
This is one reason it helps to keep the lodging amount and the M&IE amount separate in your records.
Your bookkeeping system should identify:
Lodging.
Meals and incidental expenses.
Transportation.
Other travel costs.
Any nondeductible or personal portion.
Clear categories make tax preparation easier. They also make it easier to see how much your business is actually spending on travel.
A simple way to track per diem
You do not need a complicated system.
For each trip, create a travel record with:
Traveler’s name.
Departure date and time.
Return date and time.
Destination.
High-cost or standard locality.
Business purpose.
Number of full travel days.
Number of first or last travel days.
Applicable lodging amount.
Applicable M&IE amount.
Actual lodging receipts, when required.
Notes about meals provided by someone else.
Review the record when the trip ends. Add missing receipts and details while the information is still fresh.
Then post the expenses to your books consistently.
That small habit can prevent a year-end scramble.
Per diem is a tool, not another burden
The new rates may look like another rule to memorize. They do not need to become one.
The practical approach is simple:
Use the correct rate for the destination.
Check the current seasonal high-cost list.
Apply the 75% rule to the first and last travel days.
Keep actual lodging records when you are self-employed.
Record the time, place, and business purpose.
Separate lodging from meals and incidental expenses.
Apply the appropriate deduction limits.
If you have employees, I can help you set up a consistent reimbursement process. If you are self-employed, I can help organize lodging receipts and M&IE tracking so the method is applied correctly.
At Jenni’s Business Services, I help small business owners keep their books accurate, organized, and ready for tax preparation. A bookkeeper can set up per diem tracking so travel reimbursement becomes a routine instead of a scramble.
You can learn more about our bookkeeping and tax services, book an appointment, or contact us.
Business travel already takes time and planning. Your recordkeeping can stay simple, clear, and in perfect order.
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