IRS Per Diem Rates for 2020-2021
- By Matthew Briggson
- November 16th, 2020
Since the beginning of the COVID-19 pandemic, business travel has plummeted across the globe. In the United States, business air travel fell by over 90% in the early stages of the pandemic and although it has bounced back to some degree, it remains 70% below 2019. For those who have returned to traveling for business, the IRS recently issued their updated 2020-2021 per diem rates.
Today, most employers provide a credit card (p-card) to their traveling employees to use for travel related transactions. After the trip, the employee submits an expense report, and the company pays the credit card bill. The alternative to directly paying for employee travel is to issue a per diem allowance with the employee paying out-of-pocket for their travel expenses. The per diem allowance is meant to cover hotels/lodging, meals, and incidentals.
The IRS issues per diem rates for meals as well as meals and lodging combined. If the per diem allowance to the employee is equal to or less than the IRS rate, it is not taxable to the employee. The employer must also require the employee to submit an expense report. The report should include the purpose for the trip, the dates of travel, and the receipts for the hotels or lodging expenses.
The 2020-2021 per diem rates vary by destination with rates at the “high-cost” localities being $292 per day. Of the $292 allowance for high-cost localities, $71 is attributable to meals. The rate for incidental expenses is $5 per day and has not changed from the prior year. Incidental expenses include tips for baggage carriers and hotel staff.
To find the per diem rate for your travel destination, you can go to the U.S. General Services Administration website here: https://www.gsa.gov/travel/plan-book/per-diem-rates. From the website, you can click on the state you will be traveling to and then find the city or county. If your destination is not listed, the GSA establishes a standard CONUS (continental United States) per diem rate of $151 per day which is broken down by $96 for lodging and $55 for meals and incidental expenses. Most locations are covered by this standard CONUS rate, while 319 non-standard areas (NSAs) have been assigned a higher rate.
When using per diem rates for business travel, employers should be sure to use the correct rates and require employees to submit detailed expense reports within 60 days of their trip. For more information, the IRS has created a FAQ document on per diem payments here: https://www.irs.gov/pub/irs-regs/perdiemfaq%26a.prn.pdf
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