Logan Hayes
Per diem rates are a simplified way to handle expenses for business trips, including food, accommodation, and other incidental expenses. The IRS defines breakfast as part of the meals and incidentals (M&IE) category, which also includes lunch and dinner. The M&IE rate covers the cost of meals and related services such as room service, laundry, dry cleaning, and tips for service providers. For M&IE rates above $265, the allocation for breakfast is typically 15% of the total, with the remainder going towards lunch, dinner, and the incidental expense allowance.
| Characteristics | Values |
|---|---|
| Per diem definition | Fixed amounts that are given or reimbursed to employees for business-related travel expenses |
| Per diem categories | Meals and incidentals (M&IE), lodging, or both |
| M&IE expenses | Breakfast, lunch, dinner, room service, laundry, dry cleaning, and tips for service providers |
| M&IE allocation for M&IE rates above $265 | 15% for breakfast, 25% for lunch, and 40% for dinner |
| M&IE rates for 2024 | $74 for high-cost localities and $64 for other localities within the continental US |
| Employer deduction limit | Up to 50% of per diem spending for meals and incidentals |
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What You'll Learn
- Per diem covers breakfast, lunch, and dinner
- Breakfast is included in the meals and incidental expenses (M&IE)
- Employers can deduct 50% of per diem spending for meals and incidentals
- Per diem rates vary based on geographical location and cost of living
- Per diem rates are fixed amounts given to employees for travel expenses
Per diem covers breakfast, lunch, and dinner
Per diem rates are a simplified way to manage expenses for business trips, including spending on accommodation, food, and small incidental items. These rates are set by groups like the GSA and IRS, and they vary depending on the location and nature of the trip. Per diem covers a range of expenses, including meals and incidentals (M&IE) and lodging.
M&IE includes all meals, specifically breakfast, lunch, and dinner, as well as room service, laundry, dry cleaning, and tips for service providers related to these services. For M&IE rates greater than $265, the allocation is typically 15% for breakfast, 25% for lunch, and 40% for dinner, with the remainder being the incidental expense allowance. It's important to note that meals provided by a common carrier or complimentary meals from a hotel/motel do not affect the per diem rate.
W2 employees are eligible for 75% of the total M&IE rate on the first and last travel day. The lodging category covers the cost of overnight stays, such as hotels, resorts, Airbnb, and apartments. The per diem rate for lodging is based on the season and location of the traveller's destination. Employers can refer to their organisation's human resources or accounting department for specific rates.
Additionally, employers can choose to use the IRS-simplified "high-low" rates, which differ for areas with varying costs of living. For example, for 2024, the rates were $309 for high-cost localities ($235 for lodging and $74 for M&IE) and $214 for other localities within the continental US ($150 for lodging and $64 for M&IE). These rates can be found in IRS Notice 2023-68.
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Breakfast is included in the meals and incidental expenses (M&IE)
Per diem rates are a simplified way to handle expenses for business trips. These rates are set by groups like the GSA and IRS, and they cover a range of expenses, including meals and incidentals (M&IE) and lodging. M&IE includes all meals, specifically breakfast, lunch, and dinner, as well as room service, laundry, dry cleaning, and tips for service providers. For M&IE rates greater than $265, 15% is allocated to breakfast, 25% to lunch, and 40% to dinner, with the remainder being the incidental expense allowance.
W2 employees are only eligible for 75% of the total M&IE rate on the first and last travel day. The rates vary based on geographical location and the cost of living in that area. Employers can also choose to use the IRS-simplified "high-low" rates, which set one standard rate for high-cost urban areas and another lower rate for lower-cost areas. For example, for 2024, the rates were $309 ($235 lodging, $74 M&IE) for high-cost localities and $214 ($150 lodging, $64 M&IE) for other localities within the continental US.
It's important to note that per diem rates are fixed amounts given to employees for their travel expenses, and they simplify managing these expenses by providing employees with a predetermined allowance. This eliminates the need for employees to submit detailed expense reports for each transaction, making it easier for both employers and employees to manage and save money on travel-related expenses.
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Employers can deduct 50% of per diem spending for meals and incidentals
Per diem is an allowance for lodging, meals, and incidental expenses incurred during official travel. The U.S. General Services Administration (GSA) establishes the per diem reimbursement rates that federal agencies use to reimburse their employees for these expenses. The GSA is authorised to do this by 5 U.S.C § 5702, which also allows the GSA Administrator to establish locality-based allowances with reporting requirements to Congress. The law was established to protect federal employees by fairly reimbursing them for travel expenses.
The GSA defines a per diem locality as "all locations within, or entirely surrounded by, the corporate limits of the key city, including independent entities located within those boundaries." For per diem localities with county definitions, the entire county is included, as well as any key cities and their boundaries. When a military installation or government-related facility is located partially within more than one city or county boundary, the applicable per diem rate for the entire installation or facility is the higher of the rates that apply to the cities and/or counties.
The meals and incidental expense (M&IE) breakdowns provided by the GSA allow federal travellers to deduct meals furnished by the government or included in a registration fee from their M&IE allowance. Meals provided by a common carrier or a complimentary meal provided by a hotel/motel do not affect the per diem. For M&IE rates greater than $265, 15% is allocated to breakfast, 25% to lunch, and 40% to dinner, with the remainder being the incidental expense allowance.
The M&IE rate includes taxes and tips, so travellers are not reimbursed separately for those items. Incidental expenses are defined as fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.
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Per diem rates vary based on geographical location and cost of living
Per diem rates are a convenient way to manage employee expenses during business trips, covering food, accommodation, and other incidental expenses. These rates are set by organisations like the GSA and IRS, and they vary depending on the geographical location and cost of living of the travel destination.
The per diem locality is defined as "all locations within or entirely surrounded by the corporate limits of the key city, including independent entities located within those boundaries." In the case of a military installation or government-related facility that spans multiple city or county boundaries, the applicable per diem rate for the entire facility is the higher rate among the different areas.
The rates are typically divided into two categories: meals and incidentals (M&IE) and lodging. The M&IE rate covers all meals, including breakfast, as well as room service, laundry, dry cleaning, and tips for service providers. For M&IE rates above $265, the allocation is 15% for breakfast, 25% for lunch, 40% for dinner, and the remainder for incidental expenses. The lodging category includes hotels, resorts, Airbnb, and apartments, with rates based on the season and location of the travel destination.
The IRS offers simplified "high-low" rates, with different amounts for areas with a higher cost of living (usually urban areas) and lower-cost areas. Employers can also deduct up to 50% of per diem spending on meals and incidentals. These rates are updated regularly, so staying informed about the latest rates is essential for effective financial planning.
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Per diem rates are fixed amounts given to employees for travel expenses
Per diem rates are a convenient way to manage employee expenses for business trips. These rates are predetermined allowances that cover a range of expenses, including meals, incidentals, and lodging. The rates are set by organisations like the GSA and IRS and are based on the geographical location and cost of living of the travel destination.
Meals and incidentals (M&IE) make up a significant portion of per diem rates. This category covers all meals, including breakfast, lunch, and dinner, as well as room service, laundry, dry cleaning, and tips for service providers. For M&IE rates above $265, the allocation is typically 15% for breakfast, 25% for lunch, and 40% for dinner, with the remainder being the incidental expense allowance. W2 employees are entitled to 75% of the total M&IE rate on the first and last travel days.
The per diem locality, as defined by the GSA, refers to all locations within or surrounded by the corporate limits of the key city, including independent entities within those boundaries. In cases where a facility is located across multiple city or county boundaries, the applicable per diem rate is the higher rate among the different locations.
Lodging is another critical component of per diem rates. This category includes overnight accommodation options such as hotels, resorts, Airbnb, and apartments. The lodging per diem is based on the season and location of the travel destination. Employers can set specific rates, and employees can inquire about these rates through the human resources or accounting departments.
Per diem rates offer a simplified approach to handling travel expenses. Instead of submitting detailed expense reports for each transaction, employees receive a fixed allowance that aligns with the cost of living at their destination. This method saves time and money for both employers and employees. Employers can also choose to use the IRS's simplified "high-low" rates, which offer different allowances for areas with varying costs of living.
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Frequently asked questions
Per diem rates are a simplified way to handle expenses for a business trip, including spending on places to stay, food, and small things you might need along the way. They are fixed amounts that are given or reimbursed to employees for business-related travel expenses.
The IRS allows employers to deduct up to 50% of per diem spending for M&IE. Generally, per diem rates for M&IE are divided into the following percentages for each meal: 15% for breakfast, 25% for lunch, and 40% for dinner. The remainder is the incidental expense allowance.
Per diem rates are set by groups like the GSA and IRS and are based on geographical location and cost of living. Employers can also choose to use the IRS simplified "high-low" rates, which set one standard rate for high-cost urban areas and another lower rate for lower-cost areas.
Incidental expenses related to breakfast can include room service, laundry, dry cleaning, and tips given to service providers who provide these services.
