Are per diem reimbursements taxable?

What a per diem is and when it is tax-free

A per diem allowance, in the publication’s words, is a fixed amount of daily reimbursement your employer gives you for lodging and meals and incidental expenses (M&IE) when you are away from home on business. It is tax-free only when it works as an accountable plan: the expenses have a business connection, you account to your employer within a reasonable period of time, and you return any excess. A per diem counts as adequate accounting for the amount of your expenses only if four conditions hold. 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 of the travel within a reasonable time, and you are not related to the employer. If you are related, you must be able to prove the expenses to the IRS.

The three ways to set the federal rate

For per diem amounts the federal rate can be figured three ways. The regular federal per diem rate is the highest amount the federal government pays its employees for lodging and M&IE in a locality, published by GSA at GSA.gov/travel/plan-book/per-diem-rates. The standard meal allowance is the federal M&IE rate; for 2025 it is $68 a day in most small localities, with higher rates for many cities. The high-low method is a simplified approach for the continental United States: for travel from January through September 2025 it is $319 (including $86 for M&IE) in certain high-cost localities and $225 (including $74 for M&IE) everywhere else, and both amounts stayed the same from October 1, 2025. The standard CONUS rate for places not specifically listed is $178 ($110 lodging, $68 M&IE) for FY2025 and FY2026. Use the rate for the locality where you stop for sleep or rest.

If your employer only pays M&IE, because it provides or pays directly for lodging, reimburses actual lodging by receipts, has no reasonable belief you will have lodging costs, or figures the allowance like pay (hours or miles), you compare only against the M&IE rate.

Partial days are prorated

The standard meal allowance is for a full 24-hour day. On departure and return days you prorate. Method 1: for the day you depart, add 3/4 of the allowance for that day, and for the day you return, add 3/4 of the allowance for the preceding day. Method 2 lets an employer use any method consistently applied under reasonable business practice, for example treating two full days of per diem for travel from 9 a.m. one day to 5 p.m. the next as no more than the federal rate. The calculator above uses Method 1, which is why departure and return days are counted at 3/4 each.

Where the money shows on your W-2

If your allowance is at or below the federal rate, it stays out of box 1, and you do not need to report the allowance or expenses on your return if your expenses are no more than the allowance. If it is above the federal rate, your employer reports the amount up to the federal rate under code L in box 12, not taxable, and the excess in box 1 as wages. The unreimbursed-expense deduction is limited too: if your actual expenses exceed the federal rate, only the four groups who may use Form 2106 after 2017 can claim the extra; everyone else cannot.

Worked example

An employee travels for four days, leaving on day 1 and returning on day 4, three nights away. The employer uses the standard CONUS rate of $110 lodging and $68 M&IE and pays $800 per diem. The federal rate for the trip is 3 nights x $110 = $330 for lodging, plus M&IE for 2 full days and 2 partial days at 3/4: (2 + 1.5) x $68 = $238, a total of $568. Of the $800, $568 goes under code L and is not taxable, and $232 goes into box 1 as wages. Enter 110, 68, 3, 2, 2 and 800 to confirm.

Change the amount paid to $500 and the whole $500 is below the federal rate, so nothing is wages. The worked figures follow the publication’s logic of comparing what you were paid to the federal rate, not to what you actually spent. The publication has its own Phoenix example: a $90 daily M&IE advance for 5 days ($450) where the federal M&IE rate is $86 and the trip lasts 3 days. The employee returns $180 for the two unused days, and the $12 difference ((90 − 86) x 3) is reported as wages.

If you do not prove the trip

If you cannot prove you traveled on a day for which you received a per diem, you must return that unproven amount within a reasonable time. If you do not, the unproven amount is treated as paid under a nonaccountable plan, meaning wages. The reasonable-time safe harbors are an advance within 30 days of the expense, accounting within 60 days after it, and returning the excess within 120 days.

Check the current rate

Per diem rates for localities listed for FY2026 can change at any time, and new CONUS rates take effect each October 1. Employees reimbursed under the per diem rate method during the first nine months of a year must continue under the same method through December 31, though for October through December they can keep the old rates or use the new ones. Check GSA before every trip, and see the per diem calculator linked below for a trip total.

Sources

• IRS Publication 463, Travel, Gift, and Car Expenses (2025): Chapter 1, Standard Meal Allowance; Chapter 6, Per Diem and Car Allowances; The federal rate; Prorating the standard meal allowance on partial days of travel; Reporting your expenses with a per diem or car allowance; How To Use Per Diem Rate Tables; 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.