Late last year the IRS announced the new federal per diem travel rates for Fiscal Year 2015, which spans from October 1, 2014 to September 30, 2015. Usually the per diem rates are increased only by a dollar or two however, this year the high-cost area rate was increased by $8 to $259 ($194 for lodging and $65 for meals and incidental expenses, (M&IE)) and the low-cost area rate increased by $2 to $172 ($120 for lodging and $52 for M&IE). You may be thinking that these rates do not apply to you but they may. Per diem rates allow employers and employees to better account for their business travel expenses.
Before the start of the new tax year the General Service Administration sets the per diem rates for various destinations including foreign countries, areas in the District of Columbia, and areas inside and outside the continental U.S. Additionally, certain high-cost areas are specified by key cities, sometimes including surrounding areas, for purposes of the high-low substantiation method. All other areas are to be considered low-cost areas. There are modifications to high-cost areas each year as was the case this year. The changes include the following:
- San Mateo/Foster City/Belmont, CA, Sunnyvale/Palo Alto/San Jose, CA, Glendive/Sidney, MT, and Williston, ND were added;
- The timeframes for Sedona, AZ, Napa, CA, Vail, CO, Fort Lauderdale, FL, Miami, FL, and Philadelphia, PA were modified, and
- Yosemite National Park, CA, San Diego, CA, and Floral Park/Garden City/Great Neck NY were removed from the high-cost list (Source: Thomson Reuters)
Although all employers can use these new per diem rates there are some limitations. Employees owning more than 10% of the company or self-employed individuals are not subject to these rates. Rather, all records normally required for business travel must be kept.
Lastly, because the federal fiscal year does not fall in line with calendar-year companies, calendar year companies can either keep using FY2014 rates or switch over to FY2015 rates.
To look up per diem rates by location visit gsa.gov/perdiemrates. For additional information on per diem rates visit irs.gov or gsa.gov. For additional information on business travel expenses please visit irs.gov/taxtopic511.