Key Takeaways
- New IRS business travel per diem rates take effect October 1, 2026.
- The high-low method increases to $329 per day for high-cost locations and $230 for other locations.
- The meals portion remains $86 for high-cost locations and $74 for other locations.
- Per diem rates help substantiate qualifying travel expenses but don’t eliminate the need to document the business purpose, date, and location of travel.
- Businesses should also make sure they’re using the correct 2026 mileage rate based on when the travel occurred.
- The annual update is a good opportunity to review employee travel and reimbursement policies.
Businesses that reimburse employees for travel expenses have new IRS per diem rates to account for beginning October 1, 2026.
The IRS updates these rates annually, and while the changes aren’t dramatic, they matter for employers that use per diem allowances for lodging, meals, and incidental expenses. They can also be a useful reminder to review travel and expense policies before another year begins.
The New High-Low Rates
One option available for substantiating qualifying business travel expenses is the high-low method. Rather than using a different per diem amount for every destination, this method divides locations within the continental United States into high-cost and other locations.
For travel beginning October 1, 2026, the rates are:
- $329 per day for high-cost locations, up from $319.
- $230 per day for other locations, up from $225.
Keep in mind that per diem rates are tax substantiation amounts, not necessarily a reflection of what a business traveler will actually spend. Actual travel costs may be higher, particularly in expensive markets or during conferences and other high-demand periods. Businesses should consider their own travel costs and reimbursement policies rather than assuming the IRS rates will cover an employee’s expenses.
The portion of those amounts treated as meals remains unchanged at $86 for high-cost locations and $74 for other locations.
The IRS maintains a list of locations that qualify for the high-cost rate, and some locations qualify only during certain times of the year. You can review the complete list, including the applicable dates for each location, in IRS Notice 2026-60.
What About Incidental Expenses?
The IRS also sets a separate rate for travelers who are deducting incidental expenses only. That rate remains $5 per day for travel within or outside the continental United States.
Incidental expenses generally include tips and fees paid to baggage carriers, hotel staff, and similar service providers. This is different from the meals and incidental expenses allowance discussed above and applies only in specific circumstances.
Per Diem Doesn’t Eliminate Recordkeeping
Using a per diem method can simplify the process of substantiating certain travel costs, but it doesn’t turn business travel into a documentation-free expense.
Employees still need to establish information such as the business purpose, date, and location of the travel. Employers also need to follow the applicable rules when reimbursing employees. When reimbursements exceed amounts that can be substantiated under federal rates, the excess may need to be treated as taxable wages.
That makes a clear travel and expense policy important, particularly for businesses with multiple employees traveling regularly.
Don’t Confuse Per Diem With Business Mileage
Per diem rates and mileage rates cover different types of business expenses. The distinction is particularly worth noting this year because the IRS changed the 2026 business mileage rate in July. Eligible business mileage from July 1 through December 31, 2026, uses a rate of 76 cents per mile, compared with 72.5 cents for the first half of the year.
Businesses processing expense reports should make sure they are using the correct mileage rate based on when the travel occurred, as well as the appropriate per diem rates for travel beginning October 1.
A Good Time to Review Your Expense Policy
The annual per diem update may seem like a small administrative change, but outdated reimbursement policies can create unnecessary accounting and payroll problems.
If your business reimburses employees for travel, review the policy, confirm which reimbursement method you use, and make sure the people approving and processing expenses have the current rates. It’s also worth checking that employees understand what documentation they need to submit.
Have questions about business travel expenses or employee reimbursements? We can help you understand the tax and accounting requirements and make sure your policies and processes reflect the current rules.