IRS Leaves Per Diem Rates Unchanged for 2025 - 2026 Travel Year

Business owners and employees who rely on per diem allowances for business travel can breathe a little easier, at least for now. The IRS has announced in Notice 2025-54 that per diem rates will remain unchanged for the new annual period beginning October 1, 2025, through September 30, 2026.

These rates are used to simplify reimbursement for lodging, meals, and incidental expenses when traveling for work, making them a critical part of financial planning for businesses of all sizes.

What This Means for Employers and Employees

Under the per diem substantiation method (Rev. Proc. 2019-48), employers can provide a set daily allowance for travel expenses instead of requiring employees to submit receipts for every dollar spent. The IRS deems these expenses substantiated up to the lesser of:

• The per diem allowance provided, or

• The federal per diem rate for the travel location.

This system reduces administrative work and ensures compliance when handling business travel reimbursements.

High-Low Substantiation Method

The IRS also confirmed that high-low rates remain unchanged:

• High-cost localities: $319 per day

• All other localities: $225 per day

For meal-only allocations under Section 274(n):

• High-cost localities: $86 per day

• All other localities: $74 per day

The IRS updated the list of high-cost localities (federal per diem rates of $272 or more), so businesses should review the revised list when reimbursing travel expenses.

Transportation Industry Special Rates

The transportation industry continues to benefit from special per diem rates that also remain unchanged:

• Meals & Incidental Expenses (CONUS): $80 per day

• Meals & Incidental Expenses (Outside CONUS): $86 per day

• Incidental expenses (anywhere): $5 per day

Why It Matters

While these rates have not increased, employers and employees should remain diligent. Proper use of per diem allowances ensures compliance with IRS rules, streamlines recordkeeping, and provides clear guidelines for travel-related reimbursements.

If you regularly reimburse employees for business travel or are in the transportation industry, now is the time to review your policies to ensure they align with the IRS guidelines for the 2025–2026 travel year.

Kamish & Associates Insight: Maintaining compliance with per diem rules may seem routine, but small errors can add up quickly. If your business relies heavily on employee travel, we recommend reviewing your reimbursement processes to confirm they align with the unchanged rates and updated locality lists.