IRS Updates Business Travel Per Diem Rates

Anyone who has booked a hotel room lately knows that business travel isn’t cheap. The IRS per diem rates don’t necessarily tell you what a trip will cost, but they can provide businesses with a simpler way to substantiate certain travel expenses.

Those rates change on October 1, 2026, and businesses that use per diem allowances should make sure they are working with the new numbers.

First, What Does Per Diem Actually Do?

IRS per diem rates give businesses a standardized way to substantiate qualifying lodging, meal, and incidental expenses without relying solely on actual expenses for each trip. Under the high-low method, the IRS simplifies that further by establishing one rate for designated high-cost localities and another for other locations within the continental United States.

Beginning October 1, the rates are:

• $329 per day for high-cost locations, up from $319.
• $230 per day for other locations, up from $225.

The amount treated as meals remains $86 for high-cost locations and $74 for other locations.

The IRS publishes a list of high-cost locations, but keep in mind that a location may qualify for the higher rate only during certain months of the year. You can find the complete list and applicable dates in IRS Notice 2026-60.

Don’t Treat the IRS Rate as a Travel Budget

This is an important distinction. The per diem amounts are substantiation rates under IRS rules. They aren’t necessarily a reflection of what an employee will actually spend on a business trip.

A $230 per diem doesn’t mean $230 will realistically cover lodging, meals, and incidental expenses everywhere that falls into the lower category. Hotel rates can vary considerably based on location, season, and demand. Anyone who has tried to book a room during a major conference has seen that firsthand.

Businesses should look at their own travel costs and reimbursement policies rather than automatically treating the IRS rate as the amount an employee should be expected to spend.

Per Diem Doesn’t Mean “No Receipts, No Records”

One benefit of using an allowable per diem method is that it can simplify expense substantiation. But it doesn’t eliminate the need to document the trip.

The employee still needs records supporting when and where the travel occurred and its business purpose. Businesses also need a consistent process for submitting, approving, and recording reimbursements.

The IRS also maintains a separate incidental-expenses-only rate of $5 per day. Incidental expenses generally include items such as tips and fees paid to baggage carriers, hotel staff, and similar service providers. For most businesses, however, the high-low rates and the meal and incidental expense amounts will be more relevant.

And Don’t Forget About Mileage

Per diem and mileage are two different things, and 2026 has changes to keep track of for both.

Per diem generally addresses lodging, meals, and incidental expenses associated with qualifying business travel away from home. The standard mileage rate applies to eligible business use of a vehicle.

For the second half of 2026, the IRS business mileage rate is 76 cents per mile, up from 72.5 cents for the first half of the year. That means businesses processing mileage reimbursements need to pay attention to when the miles were driven, not just when an expense report was submitted.

The IRS made the unusual midyear adjustment in response to rising fuel prices. While no additional change has been announced, businesses should keep an eye on IRS guidance in case another adjustment is made before year-end.

Make Sure Your Process Matches Your Policy

For a business with occasional travel, an outdated rate may not seem like a major issue. But inconsistent reimbursement practices become much harder to sort out when several employees travel, trips cross reporting periods, or no one is quite sure which method the company is supposed to be using.

Before the new per diem rates take effect on October 1, take a few minutes to review how your business handles travel. Know which reimbursement method you’re using, make sure the people approving expenses understand it, and give employees clear instructions about what they need to document.

Have questions about business travel reimbursements or how these rules apply to your company? We can help you understand the tax requirements and make sure your reimbursement practices are being handled properly.