New Per Diem Rates for Business Travel Took Effect October 1
If your business reimburses employees for travel with a daily allowance, the numbers just changed. The IRS released its annual update to the special per diem rates, which apply to travel on or after October 1, 2026. Under the high-low method, the daily rate rises to $329 for high-cost locations and $230 for everywhere else in the continental United States.
A quick refresher on per diem
Instead of collecting receipts for every hotel stay, meal, and tip, many employers pay travelers a fixed daily allowance. When that allowance doesn't exceed the federal per diem rate for the travel location, the IRS treats the expense as substantiated up to that amount.
The high-low method simplifies things further. Rather than looking up a separate rate for every city, employers use just two rates: one for locations on the IRS's high-cost list and one for all other locations in the continental U.S.
The new rates at a glance
Rate | Through 9/30/2026 | Starting 10/1/2026 |
High-cost localities, total per diem | $319 | $329 |
All other localities, total per diem | $225 | $230 |
Meals portion, high-cost localities | $86 | $86 (unchanged) |
Meals portion, all other localities | $74 | $74 (unchanged) |
Transportation industry meals and incidentals, continental U.S. | $80 | $80 (unchanged) |
Transportation industry meals and incidentals, outside continental U.S. | $86 | $86 (unchanged) |
Incidental expenses only | $5 | $5 (unchanged) |
Changes to the high-cost list
The updated list covers October 1, 2026, through September 30, 2027. A location qualifies as high-cost when its federal per diem rate is $280 or more.
Added: Tucson, Arizona; San Mateo/Foster City/Belmont, California; Albuquerque, New Mexico; and Cody, Wyoming
Removed: Panama City, Florida
Several locations, including New York City, Philadelphia, and Aspen, also had their high-cost periods adjusted. If your team travels to any of these places regularly, it's worth checking which months the higher rate applies.
What to do now
Update your reimbursement figures. Make sure your expense system, policy, or spreadsheet reflects the new rates for travel starting October 1.
Review your travel destinations. Employees heading to a newly added location may now qualify for the higher rate. Trips to Panama City now fall under the lower one.
Check the year-end transition rules. The IRS has specific transition rules for the last three months of 2026. If you already use per diem rates, confirm how those rules apply before switching rates mid-year.
Questions?
A clear, consistent travel reimbursement policy keeps your employees whole and keeps your records in good shape. HFM can help you review your per diem approach as part of our Client Accounting & Advisory and Tax Preparation & Planning services. Contact us with any questions.
HFM CPAs provides specialized accounting, tax, and assurance services to individuals and businesses across Connecticut and Rhode Island.
