What is a per diem rate?

A per diem rate refers to a maximum amount that can be spent on food, lodging, and incidental expenses while traveling for work. This rate varies depending on the location where you'll be staying and your job classification. It is frequently used as a reimbursement method for employers who do not wish to maintain a travel log or keep detailed records.

Why do people use per diems?

People often use per diems as a reimbursement method because it avoids the need for employees to keep track of their own expenses and turn in receipts at the end of each day. For example, if you're traveling for work and your employer offers a per diem rate, you can submit all of your receipts to them at the end of the trip, and they will take care of reimbursing you.

How to calculate per diem rates for different cities?

Per diem rates are typically based on the Standard CONUS Rates, which are used for all locations within the contiguous U.S. The exact rate depends on your job classification and whether or not you have a tax home in another location. You can find the latest rates on GSA's per diem rate finder.

What expenses are covered by Per Diem?

Per diem covers all meals eaten during travel, lodging expenses, and any incidental or miscellaneous expenses incurred during the duration of your trip.

Per Diem | Definition, What It Covers, Rules, Benefits, and Rates

Q: Is Per Diem taxable?

Per Diem rates are not taxable, and therefore will not be included in the amount you owe or refund at the end of the year.

A per diem rate is an amount you receive as an allowance per day to cover expenses related to your work.

It's also called a flat-rate expense or lump-sum payment and comes in very handy when you need to make calculations for your receipts.

Per diems are typically used in cases where employees travel on business, for work, or on special assignments.

The State Department has set foreign per diem rates for countries such as China, France, and Germany.

The Department of Defense (DOD) controls non-foreign rates in Alaska, Hawaii, and other U.S. Territories.

As for the U.S., per diem is only available at destinations within the lower 48 Continental United States (CONUS), according to the General Services Administration (GSA).

What Does It Cover?

The per diem amount you receive is intended to cover the following:

Lodging - the cost of a place to sleep, excluding taxes

Meals and incidentals - these are costs associated with food and beverages, as well as other expenses such as dry cleaning, laundry, and telephone calls

Keep in mind that the per diem amount doesn't always cover the entirety of your expenses.

You may need to pay for things like food and transportation upfront and then submit receipts for later reimbursement.

Per Diem Rules

The rules that govern per diems can be complex, so it's essential to familiarize yourself with them before you start using them.

You can find all of the details in IRS Publication 1542 - Per Diem Rates. Some things to keep in mind include:

The per diem amount you receive is intended to cover the lodging, meals, and incidentals expenses.

You cannot use per diem rates to claim a deduction for your meal expenses.

The per diem amount is not intended to cover the full cost of your travel-related expenses. You will need to pay for things like food and transportation upfront and submit receipts for later reimbursement.

If you are traveling for personal reasons, you cannot claim a per diem.

You must keep track of the amount you spend on lodging, meals, and incidentals and submit appropriate documentation to your employer. This information should be detailed in a daily journal or log.

Benefits of Using Per Diem

There are a few reasons why people might use per diems. Tracking your expenses can be a hassle when you're on the road.

With a per diem, you simply collect all of your receipts and tally them up against the daily amount you've been given. This makes it easy for both you and your employer.

On the other hand, if your employer reimburses you for your travel-related costs, they may prefer to use a per diem system.

This is because it's a more streamlined and efficient way to do things - rather than reimbursing employees for individual expenses, employers can simply reimburse them for the total amount spent within a given period of time.

In per diem, the payments are tax-free, which can be helpful when you're trying to save money on your taxes.

This means that they do not count towards your income for tax purposes, and therefore will not be included in the amount you owe or refund at the end of the year.

Per Diem Rates

The calculation for per diems rates is typically based on the Standard CONUS Rates set by the General Services Administration (GSA).

The current rate can be found on GSA's per diem rate finder.

You can also find per diem rates for city areas that are not located within the contiguous U.S.

There are a few things that determine your per diem rate, including the following:

The state or country where you'll be staying
Whether or not you have a tax home in another location
Your job classification - per diem rates for different job classifications vary
The length of your stay
Whether or not you'll be traveling as a military employee
Your status as an independent traveler or an itinerant worker*

Itinerant workers work from job sites that are not their tax home. An example would be a construction worker who lives in New York but works on a job site in Philadelphia.

If they spend time at both the job site and their home, then they have a dual residence and follow the per diem rates for itinerant workers.

Reimbursement of Expenses

Before you can get reimbursed, you must first submit your expenses to your employer.

All receipts should be submitted in duplicate - one for the company, and one for yourself. The second copy is important if there are any discrepancies or questions regarding your expenses at a later date.

It's also advisable to keep any documentation of phone calls, emails, and other correspondence with your employer regarding expenses and reimbursements.

Things to Keep Track of When Using a Per Diem System

Keep track of all meals you eat during the day, as well as snacks and drinks - even those that are work-related. These costs should be reported to your employer as "Meals Expenses".

Keep track of your lodging expenses - if you're traveling for work-related purposes, then this should be reported to your employer. The log must include dates of stay and the location where you'll be staying.

Keep track of your incidental and miscellaneous expenses - these may refer to an unforeseen circumstance (such as a cancellation), or an unplanned stop along the way.

These should also be submitted to your employer and should include details such as date, time, location, and business purpose.

Keep track of the total cost of each day you travel - this will come in handy during your final expense report.

Be sure to keep copies of all receipts and documents.

Final Thoughts

Traveling for work can be expensive, but with a per diem system in place, it can be a little bit easier to manage.

By keeping track of your expenses and submitting them to your employer, you can ensure that you're getting reimbursed for everything you're entitled to.

And remember - always keep copies of all receipts and documents, just in case there are any discrepancies down the road.

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