The Internal Revenue Service has recently published its annual notice, Notice 2023-68, providing the updated 2023-2024 special per diem standard rates which taxpayers can use when substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home (for lodging, meals and incidentals). While some of the special per diem rates are increasing, others will remain the same, as inflation continues to rise. Effective October 1, 2023- September 30, 2024, these revised rates must be used under the optional high-low substantiation method for special transportation industry rate and taxpayers taking a deduction for incidental expenses-only.
Taxpayers can use the high-low method for substantiating lodging, meals, and incidental expenses, or for just substantiating meal and incidental expenses only when traveling away from home. The per diem rules can greatly simplify the process of substantiating business travel expense amounts. However, it’s worth mentioning that according to the IRS, use of a per diem substantiation method is not required, as long as the taxpayer can substantiate the actual allowable expenses by maintaining adequate records for the expenses while being able to provide sufficient evidence to support these expenses for proper substantiation.
The new high-low per diem rate that can be used for lodging, meals, and incidental expenses increased to $309 (from $297) for travel to high-cost locations and increased to $214 (from $204) for travel to other locations. Many locations have been added to the list of high-cost locations whereas many that remain on the list are now considered high-cost for a different portion of the calendar year. The portion of the rates treated as paid for meals for purposes of Sec. 274(n) is $74 for high-cost continental U.S. locations and $64 for all other continental U.S. locations, which will remain the same during the new annual period.
This notice also provides special rates for taxpayers in the transportation industry. The special meal and incidental expense rates are $69 for any location of travel within the continental U.S. and $74 for any location of travel outside the continental U.S. The rate for any location of travel either inside or outside of the continental U.S. for the incidental only deduction is $5 per day, which will remain the same during the new annual period. Additionally, this notice revised the listing of high-cost locations that have a federal per diem rate of $261 or more (up from $251 or more). Notably, removing Los Angeles, California and Portland, Oregon from the list for the new period.
Please reference the complete linked Notice 2023-68 (updated from last year’s Notice 2022 -44) provided by the Internal Revenue Service for any additional information. As always, we are here to answer any questions or address any concerns you may have pertaining to this most recent update from the Internal Revenue Service.