If your business frequently requires employees to travel, expense accounting can become tricky, between determining what is and isn’t a legitimate business expense. The federal government simplifies this process for its own purposes by establishing a per diem rate, setting a flat amount that it uses to represent one day of business travel, lodging, and meals for one employee.
The IRS allows private businesses to use these rates as well. The amounts vary depending on the destination of travel, and include not only the continental United States, but also Alaska, Hawaii, U.S. territories, and foreign nations. For example, destinations considered “high cost,” such as New York City, are afforded a higher per diem than other cities. These rates may also be adjusted—for example, towns that see activity spikes during specific tourist seasons may have higher rates during those seasons. Immediately prior to the government shutdown of 2013, the rates for the 2014 fiscal year were raised significantly. Through September 30, 2014, the per diem to high-cost destinations has been set at $251/day (up from $242) and the rate to low-cost destinations is set at $170/day (up from $163). Be aware that per diem rates cannot be applied to any person who is self-employed or owns more than 10% share of a company—in that case, the traveler must track actual expense. The full table of per diem rates may be found at the IRS website.