IRS Raises Per Diem Rates, Changes High-Low Localities as of October 1

IRS announced new per diem rates for business travel, effective October 1, 2024. Employers can use these rates through September 30, 2025.

Notice 2024-68 contained the IRS per diem rates, which you can use to substantiate the amount of expenses for lodging, and meals and incidental expenses (M&IE) for your road warriors.

While not mandatory, many employers prefer a per diem payment approach to T&E instead of tallying up and reimbursing actual expenses based on employee-submitted records and receipts, and keeping records of all those allowable expenses.

If you rely on the IRS per diem rates, make sure you don’t exceed the set amounts. Otherwise, Payroll will need to report the excess amount as wages on Form W-2.

Important IRS Per Diem Numbers

For the purposes of the high-low substantiation method, the new IRS per diem rates are:

• $319 when traveling to any high-cost locality (currently $309), and
• $225 for travel to any other locality within the continental U.S. (CONUS) (an $11 increase over the current rate).

Breaking those two rates down further, the amount that’s treated as paid for meals is:

• $86 (was $74) for the high rate, and
• $74 (was $64) for the low rate.

Also increasing are the special M&IE rates for companies in the transportation industry. Those per diem rates are $80 (up from $69) for any area within CONUS and $86 (up from $74) for areas outside of CONUS.

The IRS per diem rate for incidental-expenses-only deductions remains $5 for all areas.

There’s also the option to use the federal per diem rates published annually by the U.S. General Services Administration, which we reported earlier. IRS Rev. Proc. 2019-48 provides the complete rules for using per diem rates.

High-Cost Localities: Who’s In, Who’s Out?

As of October 1, eight new localities have been added to the list of high-cost localities. Of those, there are four in California, two in Idaho, one in Oregon and one in Vermont. They are:

• Los Angeles
• Mammoth Lakes, CA
• Palm Springs, CA
• South Lake Tahoe, CA
• Boise, ID
• Coeur d’Alene, ID
• Bend, OR, and
• Burlington, VT.

Here are the part-time high-cost locality changes to note:

• Sedona, AZ
  • October 1 – December 31, and
  • March 1 – September 30
• Monterey, CA
  • October 1 – September 30
• Napa, CA
  • October 1 – November 30, and
  • February 1 – September 30
• San Luis Obispo, CA
  • June 1 – July 31
• Yosemite National Park, CA
  • January 1 – April 30
• Aspen, CO
  • October 1 – September 30
• Silverthorne/Breckenridge, CO
  • December 1 – March 31
• Lewes, DE
  • June 1 – August 31
• District of Columbia
  • October 1 – September 30
• Boca Raton/Delray Beach/Jupiter, FL
  • January 1 – April 30
• Fort Myers, FL
  • January 1 – March 31
• Tampa/St. Petersburg, FL
  • February 1 – April 30
• Vero Beach, FL
  • December 1 – April 30
• Bar Harbor/Rockport, ME
  • October 1 – October 31, and
  • May 1 – September 30
• Portland, ME
  • October 1 – October 31, and
  • June 1 – September 30
• Ocean City, MD
  • June 1 – August 31
• Washington, D.C. Metropolitan Area in Maryland, including Montgomery and Prince George’s counties
  • October 1 – September 30
• Falmouth, MA
  • July 1 – August 31
• Nantucket, MA
  • June 1 – September 30
• Petoskey, MI
  • June 1 – August 31
• Kalispell/Whitefish, MT
  • July 1 – September 30
• Kill Devil Hills, NC
  • June 1 – August 31
• Philadelphia, PA
  • October 1 – November 30, and
  • April 1 – September 30
• Moab, UT
  • October 1 – October 31
  • March 1 – June 30, and
  • September 1 – September 30
• Washington, D.C. Metropolitan Area in Virginia, including the cities of Alexandria, Falls Church and Fairfax; and the counties of Arlington and Fairfax
  • October 1 – September 30, and
• Seattle, WA
  • October 1 – September 30.

As of October 1, the following cities drop off the list and become regular CONUS localities:

• Mill Valley/San Rafael/Novato, CA
• Oakland, CA
• San Mateo/Foster City/Belmont, CA
• Grand Lake, CO
• Pensacola, FL
• Punta Gorda, FL
• Missoula, MT
• Carlsbad, NM
• Lincoln City, OR
• Myrtle Beach, SC, and
• Cody, WY.