Taxpayers who incur ordinary and necessary business expenses while traveling away from home have new per-diem rates to use in substantiating certain of those expenses. IRS has issued Notice 2018-77 which outlines the new rates, in effect from Oct. 1, 2018, to Sept. 30, 2019. The new rates supersede all previous rates.
Specifically, the notice covers three topics: 1) the special transportation industry meal and incidental expenses (M&IE) rates, 2) the rate for the incidental expenses only deduction, and 3) the rates and list of high-cost localities for purposes of the high-low substantiation method.
The special meals and incidental expenses rates for taxpayers in the transportation industry are $66 for any locality of travel within the continental United States (CONUS) and $71 for any locality of travel outside CONUS. Both new rates are $3 higher than last year.
The per-diem rate for the incidental-expenses-only deduction remains unchanged at $5 per day for any locality of travel. Incidental expenses include fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.
High-low substantiation method
For purposes of the high-low substantiation method, the per-diem rates are $287 for travel to any high-cost locality and $195 for travel to any other locality within the continental United States (CONUS), slightly higher than last year.
The amount of these rates that is treated as paid for meals for purposes of Sec. 274(n) is $71 for travel to a high-cost locality and $60 for travel to any other locality within CONUS, both $3 higher than last year.
The notice contains a list of the localities that are considered high-cost localities.
For assistance with claiming per-diem rates, please reach out to your BGW team member.