IRS Releases 2025 to 2026 Special Per Diem Rates, What Employers and Travelers Need To Know

The IRS has issued Notice 2025-54, updating the special per diem rates that taxpayers can use to substantiate travel expenses for the period October 1, 2025 through September 30, 2026. These rates apply to deductible business travel under section 274(d), including lodging, meals, and incidental expenses. The notice also updates the list of high cost localities, which determines whether the high low substantiation method can be used for a given destination.

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Special M&IE Rates for the Transportation Industry

Taxpayers working in the transportation industry, including long haul truckers, airline crew, and railroad employees, may use special meal and incidental expense rates instead of standard per diem rates.

For tax year 2025 to 2026, the rates are:

• 80 dollars per day for CONUS travel

• 86 dollars per day for OCONUS travel

These industry specific amounts simplify recordkeeping by eliminating the need to track actual daily meal costs.

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Updated Rate for Incidental Expenses Only

When taxpayers deduct only incidental expenses, the allowable amount remains:

• 5 dollars per day, whether inside or outside the continental United States.

This covers minor travel costs such as fees for baggage handling, tips to hotel staff, and similar expenses.

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High Low Substantiation Method for 2025 to 2026

The high low method allows employers and employees to use a single per diem rate for any locality rather than tracking the precise federal rate for each city.

Updated Rates

For travel within CONUS:

• High cost locality rate: 319 dollars per day

• All other localities: 225 dollars per day

The meals and incidental expenses portion of these rates is:

• 86 dollars per day for high cost localities

• 74 dollars per day for all other localities

These rates apply whether the taxpayer uses the full per diem method or the M&IE only method.

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List of High Cost Localities

A high cost locality is a city or region with a federal per diem of 272 dollars or more. Notice 2025-54 contains an extensive chart of high cost cities, counties, and seasonal periods. Examples include:

• Los Angeles, San Diego, and San Francisco, California

• Washington, D.C. Metropolitan Area

• Miami and Naples, Florida

• Aspen, Vail, and Telluride, Colorado

• Boston and Nantucket, Massachusetts

• Seattle, Washington

• New York City, New York

The tables in the notice show precise seasonal windows for each locality. For example, the chart on page 4 confirms that Miami is considered high cost from December 1 through May 31, while Phoenix and Scottsdale are high cost from February 1 through March 31.

Notice 2025-54 confirms that there are no changes to the high cost locality list from the previous notice, 2024-68.

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Effective Dates for the 2025 to 2026 Per Diem Rules

According to section 6 of the notice on page 7, the updated rates apply to:

• Per diem allowances paid on or after October 1, 2025, for travel occurring on or after that date

• Meal and incidental expense deductions paid or incurred on or after October 1, 2025

Transition rules under sections 4.06 and 5.04 of Rev. Proc. 2019-48 apply to late 2025 travel situations.

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How Margen Helps Employers and Travelers Apply Per Diem Rules

Per diem compliance affects payroll systems, travel reimbursement policies, independent contractor documentation, and employee tax reporting. Margen helps users apply these rules accurately by answering questions such as:

• "Which per diem rate applies for a trip to a specific city in a specific month?"

• "Whether a location qualifies as a high cost locality for the date of travel?"

• "How to structure a reimbursement policy that meets accountable plan requirements?"

• "When to use the transportation industry rate versus the high low method?"

• "How to determine the deductible meals portion for a trip under section 274(n)?"

Margen automatically references the latest IRS notices and revenue procedures, ensuring your travel expense calculations are accurate and compliant with section 274(d) substantiation requirements.

For full details, see IRS Notice 2025-54.