Each year, the IRS releases updated per diem rates, which are daily allowances that businesses and certain taxpayers can use to cover business travel expenses such as meals and incidental costs. The new rates take effect on October 1, 2026, and may impact employers, self-employed individuals, and employees who travel for work. The IRS announced the updated rates in Notice 2026-60.

For businesses and self-employed individuals who regularly travel for work, understanding these rates can help streamline expense reporting and reimbursement processes while maintaining compliance with IRS recordkeeping requirements.

What Are Per Diem Rates?

Per diem rates are daily allowances that may be used in place of tracking actual expenses for certain travel-related costs. Rather than collecting and substantiating every meal expense while traveling for business, eligible taxpayers may use IRS-approved rates to support deductions and reimbursements.

The IRS allows several simplified methods, including high-low substantiation, meal and incidental expense (M&IE) rates for the transportation industry, and an incidental expenses-only deduction rate.

These methods can reduce administrative burdens while providing a standardized approach for documenting business travel expenses.

Key 2026-2027 Per Diem Rates

According to IRS Notice 2026-60, the following rates apply for the 2026-2027 period:

High-Low Method Rates

The high-low method is a simplified way to calculate business travel expenses. Instead of tracking actual lodging, meal, and incidental costs for every trip, taxpayers can use a standard daily allowance based on whether they traveled to a “high-cost” location or another U.S. location.

The IRS designates certain cities and destinations as “high-cost localities” for per diem purposes. These designations are updated annually and may change from year to year. Refer to IRS Notice 2026-60 for the complete list of high-cost locations and applicable rates.

For travel within the continental United States (CONUS):

Travel Location	Per Diem Rate
High-cost localities	$329 per day
All other localities	$230 per day

Of these amounts, the meals and incidental expenses portion is:

• $86 per day for high-cost localities
• $74 per day for other localities

Transportation Industry M&IE Rates

These rates are designed specifically for workers in the transportation industry, such as truck drivers, airline crew members, railroad employees, and others whose jobs require frequent travel.

Rather than using location-based meal allowances, eligible transportation workers can use a standard daily rate for meals and incidental expenses while traveling for business.

Taxpayers in the transportation industry may use the following meal and incidental expense rates:

• $80 per day for travel within the continental United States (CONUS)
• $86 per day for travel outside the continental United States (OCONUS)

Incidental Expenses Only

This rate applies when a taxpayer is only claiming incidental travel expenses and not meals or lodging.

Incidental expenses generally include small costs associated with business travel, such as tips paid to hotel staff, baggage handlers, or similar service providers. The IRS allows a standard daily amount to simplify tracking and substantiating these expenses. This rate applies to business travel both within and outside the continental United States.

The incidental expenses-only deduction rate is unchanged and remains: $5 per day

What This Means for Businesses

Many businesses use per diem rates when reimbursing employees for business travel. When properly structured under an accountable plan, per diem reimbursements can simplify expense management and reduce the need to collect receipts for every meal expense.

Employers should review their travel reimbursement policies to determine whether updates are needed to reflect the new IRS rates effective October 1, 2026. Businesses should also ensure employees understand the documentation requirements necessary to support business travel, including:

• The business purpose of the trip
• Dates of travel
• Travel destination
• Time away from home

Even when per diem rates are used, adequate records must still be maintained to substantiate that travel occurred and was business related.

What This Means for Individual Taxpayers

Self-Employed Individuals

Self-employed business owners who travel for legitimate business purposes may also benefit from IRS-approved per diem methods in certain circumstances. However, rules regarding deduction eligibility can be complex, and not all taxpayers qualify for every substantiation method.

Business owners should evaluate their travel activities and consult with their tax advisor regarding the most appropriate approach for documenting deductible expenses.

Employees Who Travel

Businesses that use per diem reimbursements may update reimbursement amounts based on the new IRS rates. Employees should continue to keep records showing where they traveled, when they traveled, and the business purpose of the trip.

Business Travel Deductions Still Require Documentation

While the annual per diem updates provide a convenient alternative to tracking every travel-related expense, taxpayers should remember that per diem rates are substantiation tools, not automatic deductions. Only ordinary and necessary business travel expenses qualify, and proper documentation remains essential.

Taxpayers should continue to maintain records that support:

• The business purpose of the trip
• Dates of travel
• Travel destinations
• Time away from home for business purposes

Reviewing reimbursement policies and recordkeeping practices can help businesses and individuals remain compliant while maximizing available tax benefits.

How TRP Sumner Can Help

Navigating IRS travel expense rules can be challenging, particularly for businesses with frequent employee travel or owners who travel regularly for client and business development activities. TRP Sumner’s tax professionals can help evaluate reimbursement policies, accountable plans, and business expense procedures to help support compliance and efficiency.

This article is provided for general informational purposes only and should not be construed as tax, legal, or accounting advice. Tax laws are subject to change, and the application of tax rules depends on each taxpayer’s individual circumstances. Consult your tax advisor regarding your specific situation before taking any action based on this information.