Per Diem - United States

United States

U.S. companies and organizations use the per diem rate guide published by the General Services Administration, which provides rates for a number of cities in the United States. When an employer reports an employee's earning at the end of the year on a W-2, per diem is listed separately from taxable income, under 'Misc. non-taxable' if the company uses an accountable plan. Per diem payments made to employees under a non-accountable plan are included in Box 1 of the W-2 as taxable income. Please see IRS Pub. for instructions for Forms W-2 and W-3.

Per diem is understood to include the additional expenses incurred living away from home—basically having two residences. The GSA establishes per diem rates for hotels "based upon contractor-provided average daily rate (ADR) data of fire-safe properties in the local lodging industry."; this means that per diem varies depending on the location of the hotel—for instance, New York City has a higher rate than Gadsden, Alabama.

To qualify for per diem, work-related business activity generally requires an overnight stay. The IRS code does not specify a number of miles. However, based on case precedent and IRS rulings, it is commonly accepted that an overnight stay is required and actually occurs to justify payment of per diem allowance. The purpose of the per diem payment (or the deduction of expenses when inadequate reimbursements are provided) is to alleviate the burden on taxpayers whose business or employment travel creates duplicated expenses.

If the taxpayer anticipates employment away from home to last 1 year or less, then all the facts and circumstances are considered to determine whether such employment is "temporary". If the taxpayer anticipates employment to last (and it does in fact last) more than 1 year, the I.R.S. presumes that the employment is "indefinite". The taxpayer may rebut the presumption by demonstrating certain objective factors set forth in the revenue ruling. For employment with an anticipated or actual stay of 2 years or more, the I.R.S. holds that such employment is "indefinite", regardless of any other facts or circumstances.

Any tour of duty adding up to over 500 miles counts as a per diem. You can claim up to the per diem limit without receipts. Note also that as long as you keep a record of the amount spent and the date of the expense, then you do NOT need a receipt for any expense less than $75.

The US military pays its members per diem in accordance with the Joint Federal Travel Regulations. According to these regulations, the first and last days of travel are paid 75% of the daily General Services Administration rate, while all other days of travel receive the full rate. The JFTR also states that lodging taxes for CONUS and non foreign OCONUS are a reimbursable expense but requires a receipt. The JFTR also follows the 'expenses below $75 do not require a receipt' rule, although local disbursing officers may question charges they feel may be false.

The US Government also allows federal travelers to purchase a home at the temporary duty location and claim the allowable expenses of: mortgage interest, property taxes and utility costs actually incurred.

Per diem is also used in contracts to specify penalty accruals. Such wording would be found in reference to the expected closing date for a Real Estate contract, typically compensating a seller for a buyers lack of expedience.

In addition, truck drivers have a special way of calculating a tax deduction for per diem. All drivers who are subject to USDOT Hours of Service are elegible. As of October 1, 2009 the per diem rate is $59 per day, and they may deduct 80% of this amount from thier taxable income.