The IRS recently released the annual
update of the special per diem rates, effective October 1, 2015 to September
30, 2016, taxpayers can use to claim a tax deduction for lodging, meals, and
incidental expenses when traveling away from home for business.
These per diems can be used by
employers to reimburse employees for business travel, and the per diems for
meals and incidental expenses can be used by unreimbursed employees and the
self-employed to claim a tax deduction for business travel.
Click here to find the per-diem rates for travel
within the continental United States for any fiscal year
Under IRS Rev Proc 2007-63,
self-employed taxpayers filing a Schedule C and employees who are not covered
by an employer reimbursement plan cannot use the per diem method that includes
lodging. To claim a deduction for lodging expenses these taxpayers must claim
the actual cost. And corporations cannot
use the per diem that includes lodging for owner-employees with more than 10%
ownership, based on direct or indirect ownership.
Similar to how the Standard Mileage
Allowance works for business use of your automobile, you can elect to deduct
either the actual amount of your out of pocket expenses for meals and
“incidental” expenses while away from home on business, or claim the
appropriate federal per diem allowance determined by the location of the
trip. If you claim the per diem
allowance you do not have to save receipts for actual expenses.
The per diem rates are based on the
city where you “lay your head” at night. If your business meetings are in New
York City, but you stay overnight at a hotel in New Jersey to get a lower room
rate, you would use the New Jersey location to determine the appropriate per
diem amount.
On the first and last day of a
business trip you claim 75% of the per diem amount, unless you can show you
leave before breakfast on the first day and return after dinner on the last.
You can decide whether to deduct the
per diem rate or actual expenses on a trip by trip basis, but you must use the
same method for all days within any single business trip. You can use the
actual expenses when attending a conference in New York City in May and the per
diem rate for an August convention in Las Vegas.
The per-diem rates for FY 2016
(10/1/15 – 9/30/16) are slightly lower than those for FY 2015 (10/1/14 –
9/30/15). I did a check of the Meal and
Incidental per-diems for Atlantic City NJ and Philadelphia PA. The rate for these cities for FY 2015 was
$66, but the rate for FY 2016 is $64.
Incidental expenses include fees and
tips given to porters, baggage carriers, hotel staff, and staff on ships. The
per-diem rate for the incidental-expenses-only deduction for FY 2016 remains
unchanged at $5 per day for any locality of travel.
The special meals and incidental
expenses per-diem for transportation workers for FY 2016 is $63 for any
locality of travel in the continental United States and $68 for any locality of
travel outside the continental United States.
These are up from the FY 2015 rates of $59 and $65. A transportation worker is an employee or
self-employed taxpayer whose work directly involves moving people or goods by
airplane, barge, bus, ship, train, or truck, and requires the taxpayer to travel
away from home to areas with different federal per-diem rates during a single
trip.
Of course only 50% of the per-diem
for meals and incidental expenses are deductible. Taxpayers subject to the Department of
Transportation hours of service rules can deduct 80%.
TTFN
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