What's Happening?
The Internal Revenue Service (IRS) has released Notice 2025-54, detailing new per diem rates effective October 1, 2025. These rates apply to expenses for lodging, meals, and incidental expenses incurred while traveling away from home. The notice includes the special transportation industry rate, the incidental expenses-only deduction rate, and rates for high-cost localities under the high-low substantiation method. Taxpayers can use these federal per diem rates, published annually by the General Services Administration, to substantiate travel expenses. The use of per diem rates is optional, as taxpayers may choose to substantiate actual expenses with adequate records.
Why It's Important?
The updated per diem rates are crucial for businesses and individuals who travel frequently for work, as they provide a standardized method for calculating travel expenses. This can simplify tax reporting and ensure compliance with IRS regulations. The rates are particularly relevant for those in the transportation industry and those traveling to high-cost localities. By offering a clear framework for expense substantiation, the IRS helps taxpayers avoid discrepancies and potential audits, thereby promoting financial transparency and accountability.
What's Next?
Notice 2025-54 will be published in the Internal Revenue Bulletin 2025-41 on October 6, 2025. Taxpayers and businesses will need to review these new rates and adjust their travel expense reporting practices accordingly. As the new rates take effect, stakeholders such as tax professionals and corporate finance departments will likely analyze the implications for their clients and organizations, ensuring that travel policies align with IRS guidelines.
