The new per diem numbers at the moment are out – a bit sooner than regular. It’s essential to notice that they don’t seem to be efficient till October 1, 2020. These numbers are for use for per diem allowances paid to any worker on or after October 1, 2020, for journey away from residence.
The Internal Revenue Service (IRS) permits the usage of per diem (that’s Latin which means “for every day” – keep in mind, legal professionals love Latin) charges to make reimbursements simpler for employers and workers. Per diem charges are a set quantity paid to workers to compensate for lodging, meals, and incidental bills incurred when touring on enterprise moderately than utilizing precise bills.
Here’s How Per Diem Typically Works
A per diem fee can be utilized by an employer to reimburse workers for mixed lodging and meal prices, or meal prices alone. Per diem funds will not be a part of the worker’s wages for tax functions as long as the funds are equal to, or lower than the federal per diem fee, and the worker offers an expense report. If the worker would not present a whole expense report, the funds will probably be taxable to the worker. Similarly, any funds that are greater than the per diem fee will even be taxable.
Reimbursed & Unreimbursed Expenses
The reimbursement piece is essential. Remember that unreimbursed job bills are presently not deductible. The Tax Cuts and Jobs Act (TCJA) eradicated unreimbursed job bills and miscellaneous itemized deductions topic to the two% ground for the tax years 2018 via 2025. Those bills embrace unreimbursed journey and mileage.
That additionally implies that the enterprise commonplace mileage fee (you will discover the 2020 fee right here) can’t be used to deduct unreimbursed worker journey bills for the 2018 via 2025 tax years. The IRS has clarified, nonetheless, that members of a reserve part of the Armed Forces of the United States, state or native authorities officers paid on a charge foundation, and sure performing artists should still deduct unreimbursed worker journey bills as an adjustment to earnings on the entrance web page of the 1040; in different phrases, these people can proceed to make use of the enterprise commonplace mileage fee. For particulars, take a look at Notice 2018-42 (downloads as a PDF).
What about self-employed taxpayers? The TCJA didn’t change deductions for self-employed taxpayers (people who file a Schedule C). Self-employed taxpayers can nonetheless deduct business-related bills. However, the per diem charges aren’t as helpful for the self-employed as a result of they’ll solely use the per diem charges for meal prices. Realistically, that implies that self-employed taxpayers should proceed to maintain glorious information and use precise numbers.
The New Numbers
As of October 1, 2020, the particular meals and incidental bills (M&IE) per diem charges for taxpayers within the transportation trade are $66 for any locality of journey within the continental United States and $71 for any locality of journey outdoors the continental United States; these charges are the identical as they have been final yr. The per diem fee for meals & incidental bills contains all meals, room service, laundry, dry cleansing, and urgent of clothes, and charges and suggestions for individuals who present providers, reminiscent of meals servers and baggage handlers.
The fee for incidental bills solely stays $5 per day, regardless of the placement. Incidental bills embrace charges and suggestions paid at lodging, together with porters and lodge workers. Transportation between the place you sleep or work and the place you eat, in addition to the price of submitting journey vouchers and paying employer-sponsored cost card billings, are not included in incidental bills. If you wish to snag a break for these, and you utilize the per diem charges, chances are you’ll request that your employer reimburse you.
That’s good recommendation throughout the board: If you beforehand deducted these unreimbursed job bills and might not achieve this underneath the TCJA, ask your employer about potential reimbursements.
Of course, since the price of journey can differ relying on the place – and when – you are going, there are particular charges for sure locations. For functions of the high-low substantiation technique, the per diem charges are $292 for journey to any high-cost locality and $198 for journey to some other locality throughout the continental United States. The meals & incidental bills solely per diem for journey to these locations stay $71 for journey to a high-cost locality and $60 for journey to some other locality throughout the continental United States.
You can discover the listing of high-cost localities for all or a part of the calendar yr – together with the relevant charges – in the newest IRS discover. There are, nonetheless, just a few noteworthy adjustments, together with:
- The following localities have been added to the listing of high-cost localities: Los Angeles, California; San Diego, California; Gulf Breeze, Florida; Kennebunk/Kittery/Sanford, Maine; and Virginia Beach, Virginia.
- The following localities have been eliminated from the listing of high-cost localities: Midland/Odessa, Texas, and Pecos, Texas.
- The following localities have modified the portion of the yr by which they’re high-cost localities (which means that seasonal charges apply): Sedona, Arizona; Monterey, California; Santa Barbara, California; District of Columbia (see additionally Maryland and Virginia; Naples, Florida; Jekyll Island/Brunswick, Georgia; Boston/Cambridge, Massachusetts; Philadelphia, Pennsylvania; Jamestown/Middletown/Newport, Rhode Island; and Charleston, South Carolina.
You can discover all the listing, along with different per diem data, in Notice 2020-71 (downloads as a PDF).
To discover the federal authorities per diem charges by locality title or zip code, head over to the General Services Administration (GSA) web site.