Are accountable plan reimbursements taxable?

The three rules

For a reimbursement arrangement to be an accountable plan, Publication 463 (2025) says it must include all three of these rules. Your expenses must have a business connection, meaning you paid or incurred deductible expenses while performing services as an employee of your employer. You must adequately account to your employer for the expenses within a reasonable period of time. And you must return any excess reimbursement or allowance within a reasonable period of time. An excess reimbursement is any amount you are paid that is more than the business-related expenses you adequately accounted for.

What “reasonable period of time” means

The publication leaves the test to the facts and circumstances, but says the following actions are treated as reasonable regardless: you receive an advance within 30 days of the time you have an expense; you adequately account within 60 days after the expense was paid or incurred; you return any excess within 120 days after the expense was paid or incurred; or you receive a periodic statement at least quarterly asking you to return or account for outstanding advances and you comply within 120 days of the statement. These are safe harbors, not deadlines that make everything else unreasonable.

What happens when the plan works

If you meet all three rules, your employer should not include any reimbursements in box 1 of your Form W-2. If your expenses equal your reimbursements, you do not complete Form 2106 and you have no deduction because the two cancel. If the employer included the reimbursements in box 1 in error, you can ask for a corrected Form W-2. You also do not have to keep copies of what you gave the employer in the ordinary case, though the publication says you may have to prove expenses if they exceed reimbursements, if the plan is nonaccountable, if the employer does not use adequate accounting procedures, or if you are related to the employer.

When part of a reimbursement becomes taxable

Even inside an accountable plan, some payments are treated as nonaccountable and so are wages: excess amounts you do not return, and reimbursements for expenses that are not deductible business expenses. The publication’s example is a plan that reimburses travel away from home and also meals when you work late at the office, since the late-night meals are not deductible travel. It also says you cannot convert a nonaccountable plan into an accountable one by voluntarily accounting and returning excess. The employer decides which kind of plan it is, and if you are unsure you should ask.

Per diem and mileage allowances above the federal rate

A per diem or car allowance counts as adequate accounting for the amount only if the employer reasonably limits payments to ordinary and necessary expenses, the allowance is similar in form to and not more than the federal rate, you prove the dates, place and business purpose, and you are not related to your employer. If the allowance is higher than the federal rate, the employer must put the amount up to the federal rate under code L in box 12 of Form W-2, which is not taxable, and the excess in box 1 as wages. For car allowances the federal rate can be the standard mileage rate, which was 70 cents per mile for 2025, or a fixed and variable rate (FAVR).

Worked examples from the publication

Ari, a performing artist, was reimbursed $85 a day for four days in San Diego where the federal rate is $80. The $20 excess ($5 times 4) goes in box 1 and $320 goes under code L. In a second example, an employer advances $450 ($90 times 5 days) for meals and incidental expenses for a Phoenix trip where the federal rate is $86, but the trip lasts 3 days. The employee must return $180 for the two unused days and need not return the $12 difference ((90 minus 86) times 3), but that $12 is reported as wages. The calculator above reproduces both: enter 85, 80, 4 and 4, then 90, 86, 5 and 3.

How this connects to the 50% meal limit

Publication 463 lists an employee’s meal expenses reimbursed under an accountable plan as an exception to the 50% limit. See the business meals page for the exceptions list. Employees who spend more than they are reimbursed and are in one of the four groups that may use Form 2106 can claim the excess; everyone else generally cannot, as this page explains.

Sources

• IRS Publication 463, Travel, Gift, and Car Expenses (2025): Chapter 6, Reimbursements; Accountable Plans; Reasonable period of time; Adequate Accounting; Per Diem and Car Allowances; Returning Excess Reimbursements; Nonaccountable Plans; Table 6-1. Read November 2, 2026.

Edition read: Publication 463 (2025), for use in preparing 2025 returns. Rates and dollar limits on this page are the 2025 figures printed in that edition; check the current publication, form instructions and GSA.gov per diem tables for your tax year. This page summarizes the publication and does not replace it.