The US Internal Revenue Service (IRS) has released its annual update to per diem rates – the daily allowances businesses can use to reimburse employees for lodging, meals and incidental expenses while travelling for work.
The revised figures, published in Notice 2025-54, take effect from 1 October 2025, applying to all per diem allowances paid to employees for business travel after that date.
The guidance includes specific rates for the transportation industry, a flat rate for incidental expenses, and the updated list of high-cost localities under the high-low substantiation method, which allows employers to simplify record-keeping by applying set rates instead of tracking actual receipts.
What per diem rates mean for employers
Per diem rates allow employers to pay a fixed daily sum to staff travelling away from home, instead of reimbursing individual receipts for hotels and meals. As long as the payment does not exceed the federal rate – and the employee provides an expense report including the date, location and business purpose of the trip – the reimbursement is not treated as taxable income.
If an employer pays more than the approved federal rate or fails to maintain proper substantiation, any excess becomes taxable to the employee.
Self-employed taxpayers can also use per diem rates when deducting travel-related costs, though they typically apply only to meal and incidental expenses (M&IE), as opposed to lodging.
2025–26 transportation and incidental expense rates
For the 2025–26 fiscal year, the M&IE rate for the transportation industry remains unchanged at $80 per day for travel within the continental US (CONUS) and $86 per day for travel outside the continental US (OCONUS).
The incidental expense rate – covering tips and small service charges for hotel staff, porters, and food servers – also remains fixed at $5 per day, a rate the IRS has not adjusted for inflation for several years.
High-low substantiation and high-cost localities
Under the high-low method, employers can apply a simplified reimbursement system using two standard daily rates:
• $319 for travel to any high-cost locality within the continental US
• $225 for travel to any other locality
For meals and incidental expenses only, the per diem is $86 for high-cost destinations and $74 elsewhere.
The 2025–26 notice retains many of the same high-cost localities as last year, including New York City, San Francisco, Washington D.C., Miami, Los Angeles, and Aspen, as well as seasonal designations such as Nantucket, Vail, and Palm Springs during peak travel months.
These designations recognise the substantial variation in accommodation and dining costs across US regions and help employers maintain compliance without overburdening accounting teams.
Some areas are affected seasonally. Here’s the list for the 2025 fiscal year of high-cost localities with a federal per diem rate of $272 or more for a specified portion of the calendar year (the dates indicate when the high-cost rates apply):
Alabama
- Gulf Shores (Baldwin): June 1 – July 31
Arizona
- Phoenix/Scottsdale (Maricopa): February 1 – March 31
- Sedona: October 1 – December 31 and March 1 – September 30
California
- Los Angeles, Orange, and Ventura, and Edwards AFB, less the city of Santa Monica: October 1 – September 30
- Mammoth Lakes (Mono): December 1 – March 31
- Monterey: October 1 – September 30
- Napa: October 1 – November 30 and February 1 – September 30
- Palm Springs Riverside: October 1 – April 30
- San Diego: October 1 – September 30
- San Francisco: October 1 – September 30
- San Luis Obispo: June 1 – July 31
- Santa Barbara: October 1 – September 30
- Santa Monica: October 1 – September 30
- South Lake Tahoe (El Dorado): December 1 – March 31
- Sunnyvale/Palo Alto/San Jose (Santa Clara): October 1 – September 30
- Yosemite National Park (Mariposa): January 1 – April 30
Colorado
- Aspen (Pitkin): October 1 – September 30
- Denver/Aurora (Denver, Adams, Arapahoe, and Jefferson): October 1 – 31 and April 1 – September 30
- Silverthorne/Breckenridge (Summit): December 1 – March 31
- Steamboat Springs (Routt): December 1 – March 31
- Telluride (San Miguel): October 1 – September 30
- Vail (Eagle): October 1 – September 30
Delaware
- Lewes (Sussex): June 1 – August 31
District of Columbia
- Washington, D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George’s in Maryland): October 1 – September 30
Florida
- Boca Raton/Delray Beach/Jupiter (Palm Beach and Hendry): January 1 – April 30
- Bradenton (Manatee): February 1 – March 31
- Cocoa Beach (Brevard): February 1 – March 31
- Fort Lauderdale (Broward): January 1 – April 30
- Fort Myers (Lee): January 1 – March 31
- Fort Walton Beach/DeFuniak Springs (Okaloosa and Walton): June 1 – July 31
- Gulf Breeze (Santa Rosa): June 1 – July 31
- Key West (Monroe): October 1 – September 30
- Miami-Dade: December 1 – May 31
- Naples (Collier): December 1 – April 30
- Panama City (Bay): June 1 – July 31
- Sarasota: February 1 – April 30
- Sebring (Highlands): February 1 – March 31
- Stuart (Martin): February 1 – March 31
- Tampa/St. Petersburg (Pinellas and Hillsborough): February 1 – April 30
- Vero Beach (Indian River): December 1 – April 30
Georgia
- Atlanta (Fulton and DeKalb): January 1 – March 31
- Jekyll Island/Brunswick (Glynn): March 1 – July 31
Idaho
- Boise (Ada): October 1 – 31 and June 1 – September 30
- Coeur d’Alene (Kootenai): June 1 – August 31
- Sun Valley/Ketchum (Blaine and Elmore): December 31 – March 31 and June 1 – September 30
Illinois
- Chicago (Cook and Lake): October 1 – November 30 and April 1 – September 30
Maine
- Bar Harbor/Rockport (Hancock and Knox): October 1 – 31 and May 1 – September 30
- Kennebunk/Kittery/Sanford (York): July 1 – August 31
- Portland (Cumberland and Sagadahoc): October 1 – 31 and June 1 – September 30
Maryland
- Ocean City (Worcester): June 1 – August 31
- Washington, D.C. Metropolitan Area (Montgomery and Prince George’s): October 1 – September 30
Massachusetts
- Boston/Cambridge (Suffolk and city of Cambridge): October 1 – September 30
- Falmouth City: July 1 – August 31
- Hyannis (Barnstable less the city of Falmouth): July 1 – August 31
- Martha’s Vineyard (Dukes): October 1 – September 30
- Nantucket: June 1 – September 30
Michigan
- Mackinac Island: July 1 – August 31
- Petoskey (Emmet): June 1 – August 31
- Traverse City (Grand Traverse ): July 1 – August 31
Minnesota
- Duluth (St. Louis): October 1 – 31 and June 1 – September 30
Montana
- Big Sky/West Yellowstone/Gardiner (Gallatin and Park): June 1 – September 30
- Kalispell/Whitefish (Flathead): July 1 – September 30
New Jersey
- Toms River (Ocean): July 1 – August 31
New York
- Glens Falls (Warren): July 1 – August 31
- Lake Placid (Essex): July 1 – August 31
- New York City (Bronx, Kings, New York, Queens, and Richmond): October 1 – December 31 and March 1 – September 30
- Saratoga Springs/Schenectady: July 1 – August 31
North Carolina
- Kill Devil Hills (Dare): June 1 – August 31
Oregon
- Bend (Deschutes): June 1 – August 31
- Eugene/Florence (Lane): June 1 – July 31
- Seaside (Clatsop): July 1 – August 31
Pennsylvania
- Hershey: June 1 – August 31
- Philadelphia: October 1 – November 30 and April 1 – September 30
Rhode Island
- Jamestown/Middletown/Newport: October 1 – 31 and June 1 – September 30
South Carolina
- Charleston (Charleston, Berkeley, and Dorchester): October 1 – September 30
- Hilton Head (Beaufort): March 1 – August 31
Tennessee
- Nashville (Davidson): October 1 – September 30
Utah
- Moab (Grand): October 1 – 31, March 1 – June 30, and September 1 – September 30
- Park City (Summit): October 1 – September 30
Vermont
- Burlington (Chittenden): October 1 – 31 and May 1 – September 30
- Manchester (Bennington): October 1 – 31 and August 1 – September 30
- Montpelier (Washington): October 1 – 31 and August 1 – September 30
Virginia
- Virginia Beach: June 1 – August 31
- Wallops Island (Accomack): July 1 – August 31
- Washington, D.C. Metropolitan Area (Cities of Alexandria, Falls Church, and Fairfax; counties of Arlington and Fairfax): October 1 – September 30
Washington
- Port Angeles/Port Townsend (Clallam and Jefferson): July 1 – August 31
- Seattle (King): October 1 – September 30
Wyoming
- Jackson/Pinedale (Teton and Sublette): October 1 – September 30
Why per diem rules matter
Per diem rates are designed to simplify compliance for both employers and employees. They create a consistent baseline for travel reimbursements while ensuring that payments are properly documented and not misclassified as income.
Failing to meet IRS reporting standards can result in reimbursements being treated as taxable wages, exposing businesses to payroll tax and record-keeping risks.
Conversely, staying within federal limits and maintaining accurate expense records allows companies to streamline travel policies, particularly when managing frequent US-based trips or international assignments.
Where to find more information
The full list of high-cost localities, along with detailed instructions for employers and accounting professionals, is available in Notice 2025-54. To find the federal government per diem rates by locality name or zip code, head over to the General Services Administration (GSA) website.