Per diem rates, employee lodging, meals, incidentals | KPMG | US

Per diem rates, substantiation of employee lodging, meals, incidentals (2017-2018)

Per diem rates, employee lodging, meals, incidentals

The IRS today released an advance copy of Notice 2017-54 as the annual notice providing the 2017-2018 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.

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Notice 2017-54 [PDF 27 KB] provides:

  • The special transportation industry meal and incidental expenses rates
  • The rate for the incidental expenses only deduction
  • The rates and list of high-cost localities for purposes of the high-low substantiation method

Summary

The IRS historically issued revenue procedures as an annual update of the rules for determining when the amount of ordinary and necessary business expenses of an employee for lodging, meal, and incidental expenses incurred while traveling away from home were deemed substantiated under Reg. section 1.274-5, and when a per diem allowance under a reimbursement or other expense allowance arrangement was provided.

The annual revenue procedure also provided an optional method for employees and self-employed individuals who were not reimbursed to use in computing the deductible costs paid or incurred for business meals and incidental expenses while traveling away from home.

In 2011, the IRS announced that it intended to discontinue the high-low substantiation method. In response to comments from taxpayers that they in fact used the high-low substantiation method, the IRS issued Rev. Proc. 2011-47 stating that it would publish an annual notice that provides the special per diem rates (with the list of high-cost localities to be updated only as necessary). The IRS also provided in the revenue procedure, the rules for using a per diem rate to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.

Effective date

Notice 2017-54 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, 2017, for travel away from home on or after October 1, 2017. 

For purposes of computing the amount allowable as a deduction for travel away from home, Notice 2017-54 is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2017.

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