The basic per diem rate allowed by the IRS for meals and incidental expenses incurred by transportation workers will rise to $80 per day in fiscal year 2025, which begins Oct. 1.
The IRS made the announcement late last week.
The $80 figure is for the continental U.S. It’s $6 more than that for travel outside the continental U.S.
That’s a big jump for a number that stayed flat from fiscal year 2023 to 2024. It was at $69 for the continental U.S. for the past two fiscal years and $5 more for travel outside the U.S.
The per diem figure is what an employer can claim as an expense for payments made to drivers for meals and incidental expenses per day, known in IRS lingo as M&IE.
Within the per diem rate, $5 is for incidental expenses only.
The per diem payment is not taxed as income to the driver. A company can pay more than the IRS figure, but general practice is to pay the same level that can be deducted from a company’s income tax liability.
Going from $69 to $80 is an increase of 15.9%, a big jump for one year particularly after the same rate was in effect for two years. When the 2023 rate was put into effect, it was an increase of just $3 from 2022.
If a driver is on the road 200 days and gets paid a per diem for each of those days, that’s an annual increase of $2,200 from the past two years.
But only drivers who are on the road for a substantial portion of the day, including those who spend one or more nights on the road, would be eligible. A local driver filling the full available hours-of-service limit of 14 hours, starting and ending the day at home or a depot, would not likely be viewed as eligible for a per diem.
The per diem payments also have an option called the high-low substantiation method that varies reimbursements – and by extension, payments made by transportation companies to drivers – depending on whether the transportation is incurred in a high-cost or low-cost area.
The per diem rates under the high-low substantiation method also have a figure that includes lodging, though experts on trucking and taxes have said that is rarely taken by an industry that generally has its drivers sleeping in the sleeper cab.
The per diem that includes lodging will be $225 for low-cost areas and $319 for high-cost areas. That is an increase from $214 and $309, respectively.
If a transportation company chooses to pay a per diem on a high-low basis, the payment will be $86 for a high-cost area and $74 for a low-cost area. That is up from $74 and $64, respectively.
The IRS lists an extensive number of areas that are considered high cost where the higher number could be chosen for a per diem. However, the areas do not all have that designation all 365 days per year.
For example, a transportation company could pay a per diem to a driver working the Gulf Shores region in Alabama for just two months of the year, from June 1 through July 31.
But a transportation company serving three counties in Southern California – Los Angeles, Orange and Ventura – could pay drivers the higher per diem all year and get full IRS credit.
The example of Los Angeles could not have been in effect previously; it was just added to the list this year. Other high-cost areas from California added this year are Palm Springs, Mammoth Lake and South Lake Tahoe.
A few areas were dropped from the list of high-cost areas. They are literally all over the map, ranging from Oakland, California, to Punta Gorda, Florida.
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