Per Diem Rates Explained
Per diem rates explained in one sentence: they are fixed daily allowances for lodging, meals, and incidental expenses that let you reimburse business travel without collecting every receipt. The federal government publishes them, the IRS treats them as substantiated up to those amounts, and private employers adopt them because doing so keeps reimbursements out of taxable wages. The rates changed on October 1, 2026, so if your policy still cites last year's numbers it is now out of date. Here is how the system works and what the current figures are.
Disclaimer: This article is general information, not tax or legal advice. Per diem treatment depends on having an accountable plan, proper substantiation, and correct payroll handling, and the rules differ for employees, self-employed taxpayers, and transportation industry workers. Confirm current figures at GSA and the IRS, and consult your accountant before setting or changing a reimbursement policy.
Last reviewed: September 2026.
Current Per Diem Rates for FY2027
GSA publishes per diem rates by federal fiscal year, running October 1 through September 30. The FY2027 rates took effect October 1, 2026 and run through September 30, 2027.
- Standard CONUS lodging: $113 per night, up from $110 in FY2026.
- Standard CONUS M&IE: $68 per day, unchanged.
- Combined standard rate: $181 per day, up from $178.
- M&IE tiers: $68, $74, $80, $86, and $92, unchanged from FY2026.
- Non-standard areas: 295 locations carry their own rates for FY2027.
The standard rate applies to any location in the continental United States that does not have its own published rate. Per GSA Per Diem Bulletin FTR 27-01, if neither the city nor its county appears in the table, the location falls under the standard rate. That is where most policy errors originate, because people assume a mid-size metro must have its own figure.
Free Per Diem Trip Calculator
What Does a Trip Allow?
Calculates lodging and M&IE with the 75 percent first and last day rule applied.
What Per Diem Covers, and What It Does Not
Per diem has two components. Lodging covers the room rate and related taxes, and it is paid against eligible nights rather than as a flat daily amount. M&IE covers meals plus incidentals, which the IRS defines narrowly as fees and tips for porters, baggage carriers, hotel staff, and ship crew.
Not covered by per diem: airfare, rental cars, mileage, parking, tolls, baggage fees, conference registration, and client entertainment. Those are separate reimbursements handled on actual cost. Mileage in particular runs on the IRS standard mileage rate rather than per diem, and the two are frequently confused in small business policies.
Per diem also applies only to overnight travel away from home. A day trip to another city does not qualify for lodging or M&IE per diem under federal rules, and most corporate policies mirror that limit.
The First and Last Day Per Diem Rule
Travel days are reimbursed at 75 percent of the M&IE rate, because the traveler is not away for the full day. At the standard $68 tier that is $51, and the reduction applies at every tier, not just the standard one.
The arithmetic that confuses people: a trip with three nights has four travel days. Two of them are the departure and return days at 75 percent, and two are full days. Lodging covers the three nights, with none on the departure day. So a standard-rate trip of three nights allows $339 in lodging and $238 in M&IE, for $577 total, rather than four days multiplied by $181.
Per Diem Locality Rates vs the IRS High-Low Method
Employers have two ways to do this. GSA locality rates are the precise approach: look up the destination and use its published lodging and M&IE figures, with some locations varying by season. That accuracy matters if you allocate travel cost to a contract, grant, or client invoice, because paying a flat national rate in a low-cost city is an overpayment your funder may not accept.
The IRS high-low substantiation method is the simplified alternative: two rates instead of several hundred. Under Notice 2025-54, for travel on or after October 1, 2025, the high-low rates are $319 per day for high-cost localities and $225 for all other CONUS travel, with the meal portions treated as $86 and $74 respectively. A high-cost locality is one with a federal per diem rate of $272 or more, and the notice republishes the list, including localities that are high-cost only during specific parts of the year.
The IRS typically issues the successor notice each September for the following period, so confirm whether a newer notice has replaced these figures before applying them to travel after September 30, 2026. One constraint worth knowing: an employer must apply one method consistently for an employee across the calendar year rather than switching mid-year to whichever is more favorable, and self-employed taxpayers cannot use the high-low method at all.
Is Per Diem Taxable? How the Tax Treatment Works
This is the part that matters most and gets explained least.
Per diem paid at or below the federal rate under an accountable plan is generally not taxable to the employee and is not reported as wages. The employee still has to substantiate the time, place, and business purpose of the travel, but not the dollar amounts. That is the entire benefit of the system: it removes receipt collection without creating taxable income.
Three conditions define an accountable plan. There must be a business connection for the expense, the employee must substantiate it within a reasonable period, and any excess advance must be returned. Miss any of those and the payments become wages, subject to withholding and payroll taxes, which is a significantly worse outcome than simply reimbursing actual costs.
Amounts above the federal rate are generally treated as taxable wages unless the excess is substantiated with actual receipts. Many employers who pay a generous flat rate do not realize they have created a reporting obligation on the difference.
On deductibility, the meal portion is subject to the 50 percent limitation under section 274(n), and entertainment remains nondeductible regardless of how it is reimbursed.
Writing a Per Diem Policy
- State whether you use GSA locality rates or the IRS high-low method, and apply it consistently
- Update the rates every October 1 when the new fiscal year takes effect
- Specify how travel days are prorated, and apply the 75 percent rule consistently
- List what per diem does not cover: airfare, rental cars, mileage, parking, registration
- Require substantiation of time, place, and business purpose even when receipts are not needed
- Set a deadline for expense submission and for returning unused advances
- Decide how provided meals are handled, such as conference lunches
- Note that Alaska, Hawaii, and territories use DoD rates and foreign travel uses State Department rates
- Confirm payroll knows how to report any amount paid above the federal rate
Per Diem Rates Outside the Continental US
GSA rates cover CONUS only. Alaska, Hawaii, Puerto Rico, Guam, and other non-foreign areas outside the continental United States are set by the Department of Defense, and all other foreign locations are set by the Department of State. Looking up Anchorage or Honolulu in the GSA tool returns nothing, which catches people out regularly.
Special Per Diem Cases: Transportation, Self-Employed, and Incidentals
Transportation industry. Notice 2025-54 sets special M&IE rates for taxpayers in the transportation industry at $80 for any CONUS locality and $86 for any OCONUS locality, which avoids looking up a rate for every city on a route.
Incidentals only. Where a taxpayer deducts incidental expenses alone, the rate is $5 per day for any CONUS or OCONUS location.
Self-employed. Sole proprietors and partners may use the M&IE per diem for meals but not for lodging, which has to be deducted at actual cost with receipts.
Related parties. Per diem substantiation rules generally do not apply to employees who are related to the employer within the meaning of the tax rules, including significant owners. Those travelers typically have to substantiate actual expenses.
Common Per Diem Rate Mistakes
- Using last fiscal year's rates after October 1. The most common error, and it produces both underpayments and taxable excess.
- Paying the full M&IE rate on travel days. Travel days are 75 percent.
- Treating $181 as a flat daily payment. Lodging follows eligible nights, and there is no lodging on the departure day.
- Assuming a city has its own rate. If neither the city nor its county is listed, the standard rate applies.
- Paying per diem for day trips. Per diem requires overnight travel away from home.
- Paying above the federal rate without reporting the excess. The difference is generally taxable wages.
- Skipping substantiation because receipts are not required. Time, place, and business purpose are still required.
- Using the GSA tool for Hawaii or Alaska. Those are DoD rates, not CONUS.
Where a System Helps With Per Diem Tracking
Per diem administration is mostly a matter of applying the right rate to the right trip and getting the total into the right place at the right time.
In Updoot, time is tracked against jobs, projects, and locations, and mileage can be tracked alongside hours, so travel days are recorded where the rest of the work is rather than in a separate spreadsheet. Payroll reports compile the results in a payroll-ready format and copy to Excel or Google Sheets in one click, which is where reimbursements usually need to land for your accountant.
Frequently Asked Questions
For federal fiscal year 2027, running October 1, 2026 through September 30, 2027, the standard CONUS rate is $181 per day, made up of $113 for lodging and $68 for meals and incidental expenses. That is a $3 increase in the lodging portion from FY2026, with M&IE unchanged. The M&IE tiers remain $68, $74, $80, $86, and $92, and 295 non-standard areas have their own published rates.
Travel days are reimbursed at 75 percent of the M&IE rate, which is $51 at the standard $68 tier, and the reduction applies at every tier. A trip with three nights has four travel days: two full days and two at 75 percent. Lodging is paid against eligible nights, with no lodging on the departure day, so a standard-rate three-night trip allows $339 in lodging and $238 in M&IE.
Per diem paid at or below the federal rate under an accountable plan is generally not taxable and is not reported as wages, provided the employee substantiates the time, place, and business purpose of the travel. Amounts paid above the federal rate are generally treated as taxable wages unless the excess is substantiated with actual receipts. An accountable plan requires a business connection, timely substantiation, and the return of any excess advance.
It is a simplified alternative to looking up locality rates, using two figures instead of several hundred. Under Notice 2025-54, for travel on or after October 1, 2025, the rates are $319 per day for high-cost localities and $225 for other CONUS travel, with meal portions of $86 and $74. A high-cost locality has a federal per diem rate of $272 or more. Employers must apply one method consistently for an employee across the year, and self-employed taxpayers cannot use it.
No. Private employers set their own reimbursement policies. Most adopt the federal rates anyway, because the IRS treats amounts at or below them as substantiated without receipts, and paying above them creates taxable wages and additional documentation. Employers can also reimburse actual costs with receipts instead of using per diem at all.
No. Per diem applies to overnight travel away from home. A day trip to another city does not qualify for lodging or M&IE per diem under federal rules, and most corporate policies follow the same limit. Actual expenses such as mileage, parking, and tolls are reimbursed separately and are not part of per diem in either case.
Final Takeaway
Use the current fiscal year rates, $113 lodging and $68 M&IE for standard CONUS locations in FY2027, prorate travel days at 75 percent, and stay at or below the federal figures so the reimbursement stays out of wages. Decide between locality rates and the high-low method and apply it consistently. And put a reminder in the calendar for October 1 every year, because the single most common per diem error is a policy that quietly went a year out of date.