Per diem
A per diem allowance is a fixed daily amount an employer pays an employee for lodging, meals and incidental expenses while traveling away from home on business. Under federal rules, it is not wages when paid under an accountable plan within federal rate limits. Amounts above the federal rate, or paid without substantiation, are wages subject to payroll taxes.
Quick facts
Federal figures as of October 2026. This page covers federal rules only.
Item
Federal figure
GSA fiscal year 2027 standard continental United States (CONUS) lodging rate, for travel October 1, 2026 through September 30, 2027
$113 a day (up from $110)
GSA fiscal year 2027 standard CONUS meals and incidental expenses (M&IE) rate
$68 a day
GSA fiscal year 2027 standard CONUS total
$181 a day ($113 + $68)
GSA fiscal year 2027 CONUS locations with non-standard rates
295
High-low method, for allowances paid on or after October 1, 2026 for travel on or after that date
$329 a day for a high-cost locality, $230 for any other CONUS locality
New CONUS rates
Take effect each October 1
GSA publishes the federal per diem rates for the continental United States, and GSA’s Bulletin FTR 27-01 announces the fiscal year 2027 rates. Notice 2026-60 lists the special per diem rates, including the high-low rates, that apply from October 1, 2026. From October through December 2026, an employer may keep using the rates in effect for the first nine months of 2026, whether CONUS per diem rates or high-low rates, or use the updated rates, but must use one set consistently.
How accountable and nonaccountable plans work
An accountable plan requires a business connection, substantiation of the expenses within a reasonable period, and return of any excess within a reasonable period. One safe harbor allows an advance within 30 days of the expense, substantiation within 60 days and return of any excess within 120 days. Under federal rules, amounts paid under an accountable plan are not wages. They are not subject to income tax withholding, Social Security, Medicare or FUTA taxes, and they are not reported as pay on Form W-2.
Payments under a nonaccountable plan are wages. They are treated as supplemental wages and are subject to income tax withholding, Social Security, Medicare and FUTA taxes. An arrangement is nonaccountable if the employee need not substantiate expenses or return unused advances, if the employer pays an amount regardless of whether it reasonably expects business expenses, or if the employer pays an amount as a reimbursement that it would otherwise have paid as wages. Publication 15 explains accountable and nonaccountable plans and how per diem excess is taxed.
How the federal rate limit works
With a per diem, the employee is treated as having accounted for amounts up to the federal rate. Under the per diem substantiation method, the deemed substantiated amount for each day is the lesser of the allowance paid or the federal rate for the locality of travel, which is the federal lodging rate plus the federal M&IE rate. If the allowance paid exceeds the deemed substantiated amount, the excess is wages, taxed in the payroll period in which it is reimbursed or, for an advance, no later than the first payroll period after the one in which the travel days are substantiated. In that case the nontaxable portion is reported in box 12 of Form W-2 with code L. Revenue Procedure 2019-48 sets the IRS per diem substantiation rules.
Hypothetical example
An employer advances $200 a day for 5 days ($200 x 5 = $1,000) to an employee traveling to a location where the fiscal year 2027 standard rate applies ($113 + $68 = $181 a day). The employee substantiates time, place and business purpose for 3 travel days and returns the advance for the 2 unused days ($200 x 2 = $400).
For the 3 days, the allowance is $200 x 3 = $600 and the federal rate is $181 x 3 = $543. The lesser, $543, is not wages and is reported in Form W-2 box 12 with code L. The excess is $600 minus $543 = $57.00, which is wages. Employee Social Security tax is 6.2% x $57.00 = $3.53 and employee Medicare tax is 1.45% x $57.00 = $0.83, so employee FICA tax is $4.36. Income tax withholding also applies, and FUTA tax applies up to the federal FUTA wage base. The example assumes full travel days and wages below the $184,500 Social Security wage base for 2026.
Frequently asked questions
Is per diem taxable?
Under federal rules, per diem is not wages up to the federal rate when it is paid under an accountable plan. The part above the federal rate, and any amount paid without substantiation or return of unused amounts, is wages subject to income tax withholding, Social Security, Medicare and FUTA taxes.
Do employees need receipts for per diem?
An employee using the federal per diem rate does not need a lodging receipt. The employee still has to document the time, place and business purpose of the travel within a reasonable period, and the advance for any unsubstantiated travel days has to be returned.
Related terms: Supplemental wages, Form W-2, FICA, FUTA, Payroll tax.
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