Let’s be honest, trying to navigate IRS rules usually feels like reading a VCR manual in a language you don’t speak. But if you’re traveling for work, or you're the one cutting the checks for a team that does, the IRS per diem rate 2025 is basically your best friend.
It’s the "daily allowance" that saves everyone from the nightmare of a thousand crumpled Taco Bell receipts. Basically, instead of tracking every single dollar spent on a lukewarm hotel breakfast or a turkey club sandwich at the airport, the IRS lets you use a flat daily rate.
But here is the catch. The "2025" rates actually kicked in on October 1, 2024.
The IRS follows the federal fiscal year, not the calendar year. So, if you’re looking for the rates that apply right now in January 2026, you’re actually looking at the 2025-2026 cycle which started back in October. It sounds confusing. It is.
The Numbers You Actually Care About
If you use the "High-Low" method—which is the simplified version most businesses prefer—the rates stayed surprisingly steady recently.
For travel starting October 1, 2025, the high-cost area rate is $319 per day. If you’re heading somewhere that isn't on the "fancy" list (the IRS calls these "other localities"), the rate is $225 per day.
That $319 for high-cost areas breaks down into $233 for lodging and $86 for meals and incidental expenses (M&IE).
For the $225 low-cost rate, you're looking at $151 for lodging and $74 for meals.
Most people don't realize that "incidentals" aren't just snacks. We're talking tips for the bellhop, the person who cleans your room, and even the dry cleaning bill you racked up because you spilled coffee on your only suit.
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What counts as a high-cost area?
You’d think it’s just New York City and San Francisco. Wrong.
The list of high-cost localities is surprisingly long and, frankly, a bit quirky. It changes every year based on how expensive it actually is to stay there. We're talking places like Sedona, Arizona; Aspen, Colorado; and even certain parts of the Jersey Shore during peak season.
Honestly, the IRS doesn't just look at the city name. They look at the dates. Some places are only "high-cost" during the summer or winter.
If you aren't using the High-Low method, you're probably using the standard GSA (General Services Administration) rates. For 2025, the standard Continental United States (CONUS) lodging rate bumped up to $110, and the standard M&IE rate is $68.
The Transportation Industry Twist
If you’re a truck driver or work in the transportation industry, the rules are slightly different. You guys get a special rate because, let’s face it, your "office" is a 18-wheeler and you aren't exactly staying at the Hilton every night.
For 2025, the special M&IE rate for the transportation industry is $80 for any locality in the continental U.S. and $86 for anything outside of it.
It’s a bit higher than the standard meal allowance because the IRS recognizes that eating on the road is expensive and often less healthy than what you’d cook at home.
The First and Last Day Rule (The 75% Headache)
You can't claim the full per diem if you only traveled for half the day.
If you leave your house at 3:00 PM on a Monday, the IRS doesn't think you should get a full day's worth of breakfast and lunch money. Usually, you have to prorate the M&IE rate to 75% for the day you leave and the day you come back.
Lodging is different. You only get the lodging per diem for the nights you actually spent away from home. If you flew home at midnight, no lodging money for you.
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Why Does This Even Matter?
Tax-free money. That's why.
If an employer pays an employee exactly the IRS per diem rate 2025, that money isn't counted as wages. It doesn't show up on a W-2. No payroll taxes. No income tax.
But—and this is a big "but"—if the employer pays more than the rate, that extra cash is considered taxable income. It’s like a bonus that Uncle Sam wants a piece of.
Also, if you're self-employed, you can use the per diem for meals, but you generally have to use actual receipts for lodging. You can’t just "estimate" what a hotel cost and pocket the difference. The IRS is onto that one.
Common Mistakes People Make
- The 10% Rule: If you own more than 10% of the company, you can't use the per diem method for lodging. You have to keep the receipts. Sorry, boss.
- The One-Year Rule: If your "temporary" assignment lasts longer than a year, it’s no longer temporary. The per diem becomes taxable income because the IRS decides that new city is now your "tax home."
- No Paperwork: You still need to prove you actually went somewhere. You need the "who, what, where, when, and why." Just having a rate isn't a "get out of jail free" card for record-keeping.
- Mixing Methods: You can't use High-Low for one employee and the regular GSA rates for another in the same year. Pick a lane and stay in it.
Your Next Steps
First, check if your company uses the High-Low method or the GSA city-by-city rates. If you're using High-Low, make sure you've updated your accounting software to reflect the $319/$225 split that started in late 2024.
Next, verify your "high-cost" destinations. Don't assume a city is high-cost just because it’s expensive; check the actual IRS list in Notice 2024-68 (or the 2025-54 update for the newest window).
Finally, make sure your team knows about the 75% proration for travel days. It’s the easiest place to mess up an audit. If you’re a freelancer, start a dedicated folder for your travel logs now, because trying to remember where you were last October when tax season hits is a recipe for a headache.