[intro]See how much IRS per diem rates in 2019 let companies deduct in business travel to ten US cities through September 30, 2019.[/intro]
In this article, we’ll take a look at the US federal government’s per diem travel rates in effect for fiscal year 2019 (we did this in 2018 too). Read on to get the rates to inform your business expense policy and compare them against real-world benchmarks.
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What are IRS per diem rates?
IRS per diem rates represent what the US government predicts will be the average cost of lodging and eating in a given locality. Every year, the federal government’s General Services Administration (GSA) publishes a detailed table of per diem rates. These rates specify how much federal employees are allowed to spend in two categories of travel expenses: lodging, and meals and incidental expenses (known as M&IE, which covers only meals and server tips and fees). The dollar amounts for these per diem rates are calculated for individual areas based on actual local costs. Hundreds of cities in the US have unique GSA rates. The IRS allows private companies to use the GSA’s per diem rates as a “safe harbor” rate for deductions in those two categories of travel expense. Taking advantage of these rates minimizes the recordkeeping burden on both the government and the taxpayer. As long as businesses don’t deduct more than these amounts, these expenses will not be considered part of employees’ taxable wages.More businesses are reimbursing travel expenses in 2019
Since the last set of per diem rates were released in 2018, the Tax Cuts and Jobs Act came into effect. The new law changed vast areas of the deductible expense regime, such as eliminating the deductibility of entertainment expenses. In IRS per diem rates in 2019, travel expenses are still deductible — up to 50% for meals — but only for employers. The law eliminated the ability for employees to deduct unreimbursed business expenses. In the past, employees could pay out of pocket for business expenses and instead of collecting reimbursement from their employers, deduct the amounts from their taxable wages (if the total spend was over 2% of their adjusted gross income.) This year, that option is gone. Employees may no longer deduct this kind of expense. The upshot, presumably, is that any business that asks employees to spend money on business travel between now and 2026, when this provision of the law expires, will reimburse those out-of-pocket expenses. Given the expected rise in the number of businesses reimbursing employee travel expenses, these IRS per diem rates become even more important than in years past. If employers deduct more travel expenses than these rates specify, the business needs to either report the expenses in detail under an accountable plan or stick employees with additional taxable wages. Therefore, it’s fair to expect that the majority of businesses with travel expenses will be deducting (and possibly offering to reimburse employees) only up to these amounts.IRS per diem rates in 2019: What they buy you in the 10 biggest US cities
For 2019, the default per diem rate in the continental US is $94 for lodging and $51 for M&IE. These rates are the standard deductions for travel to any area of the continental US not specified as having a special rate — mostly small towns and rural areas. If your employees are traveling to a city, though, you’ll need to refer to the list of places identified as “non-standard areas.” The full list of those 300+ non-standard areas, along with their per diem rates, is available on the GSA website. Below, we’ve compiled the rates for 10 of the biggest US cities for business travel, along with a few benchmark numbers that help indicate how far that money will go. Important: Since the GSA calculates the cost of lodging by month in order to account for heavy travel seasons, the lodging rates shown below are the median of that city’s 2019 rates. City data provided by PriceOfTravel.com, Expatistan.com, and Numbeo.com. Per diem rates available at GSA.gov.New York City: $76 M&IE, $253 lodging
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- Average business district lunch: $16
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- Meal, inexpensive restaurant: $20
- Price range of 3-star hotels: $206 – $510
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San Francisco: $76 M&IE, $270 lodging
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- Average business district lunch: $16
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- Meal, inexpensive restaurant: $16.50
- Price range of 3-star hotels: $180 – $350
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Washington, DC: $76 M&IE, $181 lodging
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- Average business district lunch: $14
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- Meal, inexpensive restaurant: $16
- Price range of 3-star hotels: $72 – $270
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Las Vegas: $61 M&IE, $130 lodging
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- Average business district lunch: $13
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- Meal, inexpensive restaurant: $15
- Price range of 3-star hotels: $57 – $182
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Orlando: $66 M&IE, $122 lodging
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- Average business district lunch: $16
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- Meal, inexpensive restaurant: $15
- Price range of 3-star hotels: $50 – $98
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Chicago: $76 M&IE, $201 lodging
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- Average business district lunch: $13
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- Meal, inexpensive restaurant: $15
- Price range of 3-star hotels: $156 – $285
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Los Angeles: $66 M&IE, $180 lodging
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- Average business district lunch: $15
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- Meal, inexpensive restaurant: $15
- Price range of 3-star hotels: $80 – $275
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Boston: $71 M&IE, $273 lodging
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- Average business district lunch: $15
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- Meal, inexpensive restaurant: $15
- Price range of 3-star hotels: $132 – $210
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Philadelphia: $61 M&IE, $180 lodging
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- Average business district lunch: $14
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- Meal, inexpensive restaurant: $15
- Price range of 3-star hotels: $109 – $259
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Dallas: $66 M&IE, $149 lodging
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- Average business district lunch: $13
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- Meal, inexpensive restaurant: $14
- Price range of 3-star hotels: $104 – $179
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