If you travel for business, you will likely have expenses to write off in one of two ways: recording actual expenses (with back-up receipts) or using per diem rates established by the IRS. Starting October 1, 2021, new per diem rates will go into effect for taxpayers to substantiate the amount of “ordinary and necessary” expenses for lodging, meals and other incidental expenses incurred when traveling away from home for work purposes.
The IRS released Notice 2021-52 on Friday, September 4, which includes the new rates for October 1, 2021 – September 30, 2022. The updated rates are effective for per diem allowances paid to any employee during this time period. In essence, the rates are $296 per day for travel during certain times of the year to any high-cost locality and $202 for travel to any other locality within the continental US. For example, Park City, Utah is considered high-cost during ski season (December 1 – March 31) and Nantucket, Mass. is considered high-cost during the summer (June 1 – September 30). You can read the notice here to see if a location you will be visiting is considered high- or low-cost.
The amount of the per diem rate that is treated as paid for meals is $74 for travel to a high-cost locale and $64 for any other locality. Incidental expenses include only fees and tips given to porters, baggage carriers, hotel staff and staff on ships and is only $5. (Really!?)
Keep in mind that you can always deduct your actual expenses as long as you have receipts, and in many cases this is the best way to go. But in case you lose all of your documentation, you can still use the per diem rate to write off a portion of your employees’ travel costs.