Wednesday, September 24, 2014
IRS ANNOUNCES NEW PER DIEM RATES FOR BUSINESS TRAVEL
As it does every year at this time, the IRS has issued the special “per diem rates” for meals and incidental expenses and lodging to use in lieu of claiming actual expenses when deducting, or being reimbursed for, the costs of an overnight business trip for the fiscal period October 1, 2014 – September 30, 2015. There appears to be no change from the prior period rates.
Under IRS Rev Proc 2007-63 self-employed taxpayers and employees claiming unreimbursed employee expenses cannot use the per diem for lodging. They can only use the meal and/or incidental expense per diems, and must claim actual lodging expenses. The lodging per diem is only for employers reimbursing employees for business travel.
The minimum per diem for “meals and incidental expenses”, for all locations without specified rates, remains at $46.00.
Business travelers who do not incur meal expenses on business trips can continue to deduct $5 per day for “incidental” expenses only. This rate applies for any CONUS or OCONUS locality of travel. Incidental expenses include fees and tips to porters, baggage handlers, and hotel staff. Transportation to meals, laundry, lodging taxes, and telephone calls are not included in incidental expenses and can be deducted separately.
These per diem rates are based on the city where you “lay your head” at night. If your business meeting is in New York City, but you stay overnight at a hotel in New Jersey to get a lower room rate, you would use the city or county in New Jersey to determine the appropriate per diem amount.
You can choose to deduct either the actual expenses or the government per diem rate. You can decide whether to deduct actual expenses or the per diem allowance on a trip-by-trip basis, but you must use the same method for all days within a single business trip. If you elect to use the per-diem allowance you can claim 75% of the per diem amount on the first and last day of the trip.
I recently attended the NATP Tax Forum in Atlantic City NJ. The per diem for Atlantic City is, and remains, $66.00. I kept track of my actual meal expenses during the trip, which totaled less than $200.00, and I did not incur any “incidental” expenses. I arrived in AC on Tuesday and left on Friday. 3½ days (Wednesday and Thursday = 2 days, and Tuesday and Friday = 2 days @ 75% = 1½ days) at the per diem rate of $66.00 is $231.00. Obviously I will claim the per diem rate. As an added bonus, by doing this I do not have to save receipts for my meals.
Click here to find the appropriate rate for your locality of travel.
The special meal and incidental expense per diem rate for taxpayers in the transportation industry - employees or self-employed taxpayers whose work directly involves moving people or goods by airplane, barge, bus, ship, train, or truck and requires the worker to travel away from home to areas with different federal per diem rates during any one trip - remains $59 for any locality of travel in the continental United States (CONUS) and $65 for any locality of travel outside the continental United States (OCONUS). If a transportation worker elects to use these special per diem rates they must be used for the entire calendar year.
Of course only 50% of qualifying business meals (including the per diem for meals and incidental expenses) are deductible, regardless of which method you choose.