The basic per diem rate allowed by the IRS for meals and incidental expenses incurred by transportation workers will rise to $80 per day in fiscal year 2025, which begins Oct. 1.
The IRS made the announcement late last week.
The $80 figure is for the continental U.S. It’s $6 more than that for travel outside the continental U.S.
That’s a big jump for a number that stayed flat from fiscal year 2023 to 2024. It was at $69 for the continental U.S. for the past two fiscal years and $5 more for travel outside the U.S.
The per diem figure is what an employer can claim as an expense for payments made to drivers for meals and incidental expenses per day, known in IRS lingo as M&IE.
Within the per diem rate, $5 is for incidental expenses only.
The per diem payment is not taxed as income to the driver. A company can pay more than the IRS figure, but general practice is to pay the same level that can be deducted from a company’s income tax liability.
Going from $69 to $80 is an increase of 15.9%, a big jump for one year particularly after the same rate was in effect for two years. When the 2023 rate was put into effect, it was an increase of just $3 from 2022.
If a driver is on the road 200 days and gets paid a per diem for each of those days, that’s an annual increase of $2,200 from the past two years.
But only drivers who are on the road for a substantial portion of the day, including those who spend one or more nights on the road, would be eligible. A local driver filling the full available hours-of-service limit of 14 hours, starting and ending the day at home or a depot, would not likely be viewed as eligible for a per diem.
The per diem payments also have an option called the high-low substantiation method that varies reimbursements – and by extension, payments made by transportation companies to drivers – depending on whether the transportation is incurred in a high-cost or low-cost area.
The per diem rates under the high-low substantiation method also have a figure that includes lodging, though experts on trucking and taxes have said that is rarely taken by an industry that generally has its drivers sleeping in the sleeper cab.
The per diem that includes lodging will be $225 for low-cost areas and $319 for high-cost areas. That is an increase from $214 and $309, respectively.
If a transportation company chooses to pay a per diem on a high-low basis, the payment will be $86 for a high-cost area and $74 for a low-cost area. That is up from $74 and $64, respectively.
The IRS lists an extensive number of areas that are considered high cost where the higher number could be chosen for a per diem. However, the areas do not all have that designation all 365 days per year.
For example, a transportation company could pay a per diem to a driver working the Gulf Shores region in Alabama for just two months of the year, from June 1 through July 31.
But a transportation company serving three counties in Southern California – Los Angeles, Orange and Ventura – could pay drivers the higher per diem all year and get full IRS credit.
The example of Los Angeles could not have been in effect previously; it was just added to the list this year. Other high-cost areas from California added this year are Palm Springs, Mammoth Lake and South Lake Tahoe.
A few areas were dropped from the list of high-cost areas. They are literally all over the map, ranging from Oakland, California, to Punta Gorda, Florida.
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Randy Winters
Also for the people on per diem and close to retirement age. Social security income is based on your wages when you retire. So when your getting per diem part of your income isn’t taxed which lowers you income. Then you would get less social security
Michael Tasker
Per diem paid to driver by company has never been good for the driver. It’s had one-way benefits for the company only. They do have a hard sell trying to get you to accept it, though. Any driver with half a brain could see through the ruse but too many haven’t got that much.
For the last 5-6yrs, maybe a bit longer, company drivers haven’t been allowed to claim per diem, so the point is moot. If you’re a lease operator, you’re only allowed under certain conditions. So, unless you’re an O/O operating under someone else’s authority or an I/O with your own numbers, you’re likely not going to be affected by the rule change.
Bill Knipple
I think it’s important to mention that company drivers are no longer eligible for the per diem, only owner operators, who own or lease the truck.
Gene Mccook
The article to me misrepresents how companies actually pay drivers with per diem.
Owner operators/independent drivers are able to deduct the daily per diem but the 80 percent limit has went back into effect after 2 years of 100 percent.
Companies dont actually pay their drivers perdiem , they simply use part of their regular pay as per diem and dont tax it , an example guys gets 50 cents per mile , the company designates 10 cents per mile as perdiem , or they simply subtract the daily perdiem from and designate it non taxable per diem.
Does this benefit the driver ? he gets a little more take home pay , but he gets less ss contribution , less pay to figure in a workmans comp claim, less in event of unemployment .
what does the company get ? less matching ss contribution, less unemployment tax paid, less workmans comp premiums paid , etc.
per diem to company drivers is of no benefit long term, it does benefit the company greatly.
Stephen Webster
The same rates should apply to foreign drivers from Canada and Mexico while U S Soil