COVID-19 tamped down business travel, but travel has picked up considerably. From a tax perspective, the cost of business travel can be deductible provided there is proper substantiation. The tax law is specific on what is needed for this purpose, including a record—written or online—of the business purpose for the expense, the dates of the travel, the destination, and amounts spent on each separate expense for lodging, meals, etc. (Code §274(d)). In addition, documentary evidence, such as receipts, is needed to back up each expense. However, business travelers may use certain government sets certain per diem rates to substantiate the cost of business travel—lodging, meals, and incidental expenses. Relying on these per diem rates avoids the need to retain receipts and other evidence of cost. There are three different per diem rates as explained below.

Federal Per Diem Rate

The federal rate is the highest rate the government pays to its employees for lodging, meals, and incidental expenses while traveling away from home on business. Private employers may use the same rates. The rates run on the government’s fiscal year. Rates for fiscal year 2023 beginning on Oct. 1, 2023. Rates within the continental United States (CONUS) are set by the General Services Administration. Rates for Alaska, Hawaii, U.S. territories, and possessions (OCONUS) are set by the Department of Defense. Rates for travel to foreign countries are set by the State Department.