The IRS has released Notice 2025-54, providing updated per diem rates for travel away from home beginning October 1, 2025. These rates can simplify expense administration for employers by allowing certain travel costs to be treated as substantiated without requiring employees to document every dollar spent. Employees must still document the time, place, and business purpose of travel.
High-Low Method Rates
For travel within the continental United States, employers may use the optional high-low substantiation method:
- Lodging, meals, and incidental expenses (M&IE): $319 for high-cost localities and $225 for all other locations.
- Meals and incidental expenses only: $86 for high-cost localities and $74 for all other locations.
These amounts are unchanged from last year, and the list of designated high-cost localities remains the same for the period October 1, 2025, through September 30, 2026.
Other Special Rates
- Transportation industry employers may continue to use special industry-specific per diem rates.
- Self-employed individuals cannot use the high-low method, but may use other per diem rates to substantiate meals and incidental expenses (not lodging).
- The rate for incidental expenses alone remains at $5 per day.
What This Means for Employers
Employers who adopt the per diem method make expense reporting easier and avoid tracking actual costs, provided the allowance does not exceed the applicable IRS limit. Unused amounts generally do not need to be returned or taxed. If allowances exceed the substantiated rates, however, the excess must be treated as taxable wages or supported by receipts.
Takeaway
For HR and payroll teams, these updated rates provide an efficient tool to manage travel reimbursements. Employers should review their travel policies before October 1 to ensure per diem practices align with the new IRS guidance.
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This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.
