Rates Effective On or After October 1, 2015
The Internal Revenue Service (IRS) has released an annual notice that provides the 2015–2016 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.
Previous IRS guidance provides rules for using a per diem rate to substantiate (under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations) the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers using the rates and list of high-cost localities provided below must comply with the previous guidance.
IRS Notice 2014-57 provides the rates and list of high-cost localities for the period of October 1, 2014, to September 30, 2015.
Per Diem Rates
•The special meal and incidental expenses rates for taxpayers in the transportation industry are $63 for any locality of travel in the continental United States (CONUS) and $68 for any locality of travel outside the continental United States (OCONUS);
•The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day;
•For purposes of the high-low substantiation method, the per diem rates are $275 for travel to any high-cost locality and $185 for travel to any other locality within CONUS;
– The amount of the $275 high rate and $185 low rate that is treated as paid for meals (for purposes of Internal Revenue Code § 274(n)) is $68 for travel to any high-cost locality and $57 for travel to any other locality within CONUS;
– The per diem rates regarding the meal and incidental expenses only substantiation method are $68 for travel to any high-cost locality and $57 for travel to any other locality within CONUS; and
•The localities listed in section 5 of the annual notice have a federal per diem rate of $230 or more, and are high-cost localities for all of the calendar year or the portion of the calendar year specified in parentheses under the key city name.
The annual notice is effective for per diem allowances for lodging, meal, and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2015, for travel away from home on or after October 1, 2015. For purposes of computing the amount allowable as a deduction for travel away from home, the annual notice is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2015.
Note: There are transition rules for the last 3 months of calendar year 2015. Click here for more information (§§ 4.06; 5.04).