If you travel for work, take note: The IRS recently released Notice 2023-68, which has significant implications for those who frequently travel for business or work-related purposes.
Understanding IRS Notice 2023-68
Recognizing the impact of inflation on everyday expenses, especially for travelers, the IRS has adjusted its special per diem rates for the fiscal year 2023-2024, and goes into effect on October 1, 2023.
What Are Per Diem Rates?
Per diem rates are daily allowances that taxpayers can use to substantiate their expenses for lodging, meals, and incidental expenses while traveling away from home for business purposes. These rates provide a standard framework for expense reporting, making it easier for individuals and businesses to manage their finances.
Key Changes
- Special Transportation Industry Rates: For taxpayers in the transportation industry, the special rates for meals and incidental expenses remain consistent at $69 for anywhere within the continental United States and $74 for locations outside the continental U.S. Similarly, the rate for incidental expenses for any travel locality, whether within or outside the continental U.S., is $5 per day.
- High-Low Substantiation Method: The IRS adjusted per diem rates under the high-low substantiation method to account for inflation. For this method, the rates for travel are as follows:
- Travel to any high-cost locality within the continental U.S.: $309 (up from $297 in 2022-2023). You can find a list of these locations – and the times they are considered high-cost starting on page 3 of this IRS notice.
- Travel to any other locality within the continental U.S.: $214 (up from $204 in 2022-2023)
- Meals and Incidental Expenses-Only Rates: For those using the meal and incidental-expenses-only substantiation method, the rates for 2023-2024 are as follows:
- Travel to any high-cost locality within the continental U.S.: $74
- Travel to any other locality within the continental U.S.: $64
- List of High-Cost Localities: The notice also provides a list of high-cost localities, which are those with a federal per diem rate of $261 or more. This threshold has increased from $250 or more in 2022-2023 and $249 or more in 2021-2022. You can find a list of these locations – and the times they are considered high-cost starting on page 3 of this IRS notice.
Flexibility in Expense Substantiation
It’s important to note that while the IRS provides these per diem rates as a convenient option, using the per diem substantiation method is not mandatory. Taxpayers have the flexibility to substantiate their actual allowable expenses by maintaining adequate records or other evidence, which can be especially advantageous for those with unique travel circumstances.
Consult with Us for Guidance
If you have questions or need assistance in understanding how these changes might affect your tax strategy, please don’t hesitate to reach out to us. We are committed to helping you optimize your finances while adapting to the evolving economic landscape.