2025–2026 IRS Per Diem Rates Released
Posted by John Anderson on October 06, 2025
Managing business travel expenses can be a headache. Tracking receipts for meals, lodging, and incidentals often feels like a full-time job. Fortunately, the IRS offers a simpler solution to tracking every expense, the high-low per diem method. This approach streamlines reimbursements, reduces paperwork, and keeps your business compliant.
In IRS Notice 2025-54, the IRS announced updated high-low per diem rates effective October 1, 2025, through September 30, 2026. Here’s what you need to know.
What Is the Per Diem Method?
Instead of requiring employees to submit every receipt, the per diem method allows businesses to reimburse a fixed daily amount for travel expenses. Employees only need to document:
- Time of travel
- Place visited
- Business purpose
If reimbursements don’t exceed IRS-approved per diem rates, they’re not taxable income and don’t require payroll tax withholding.
Understanding the High-Low Method
The IRS designates certain U.S. locations as high-cost areas and assigns them a higher per diem rate. All other continental U.S. destinations fall under the low-cost category.
- High-cost examples: Boston, Los Angeles
- Seasonal high-cost areas: Some cities (like New York City or Chicago) only qualify during peak months, often tied to tourism or seasonal demand.
If lodging is provided or paid directly by the employer, employees can receive a per diem for meals and incidental expenses only. There’s also a $5 incidental-only rate for days when meals aren’t incurred.
New High-Low Per Diem Rates for 2025–2026
Starting October 1, 2025:
- High-cost areas: $319 per day
- Lodging: $233
- Meals & incidentals: $86
- Low-cost areas: $225 per day
- Lodging: $151
- Meals & incidentals: $74
For the last three months of 2025, employers must stick with the same reimbursement method used earlier in the year. Also, per diem rates cannot be paid to individuals who own 10% or more of the business.
Why Consider Switching to Per Diem?
As we approach 2026, now is the perfect time to review your travel reimbursement policy. Moving from an actual expense method to per diem can:
- Save time for your finance team
- Reduce frustration for employees
- Ensure IRS compliance
Need Guidance?
If you have questions about implementing per diem rates or optimizing your travel reimbursement process, contact us today. We’ll help you find the most efficient and tax-compliant solution for your business.
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As a tax manager, John provides tax compliance and planning services to a variety of commercial businesses and individuals. His primary focus is servicing clients in the real estate industry, both commercial and residential.