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Here’s What The 2018 IRS Per Diems Get You In 10 US Cities

The numbers are in, folks. The federal government has announced this year’s per diem dollar amounts, which means we now know how much the IRS is going to let your company deduct in business travel to US cities through September 30, 2018.

What are IRS per diems?

Per diem rates are released annually by the General Services Administration to dictate what federal employees can spend in two categories of travel expenses: lodging and meals & incidental expenses (M&IE). The latter category covers only employee meals and server tips/fees.

The IRS lets private companies use the GSA’s per diem rates as standard deductions in those two categories of travel expense. Much like the safe harbor rate for mileage, taking advantage of these standard deductions minimizes a company’s recordkeeping burden. As long as your employees submit proper expenses and you don’t deduct more than the specified rate, per diem rates will not be considered part of your employees’ taxable wages.

Many travel expenses are not covered by lodging and M&IE. Transportation, baggage fees, meals involving alcohol, WiFi charges, and more must be itemized separately, and are 50% deductible in most industries. The IRS tends to look closely at travel expenses, so be sure to consult a tax professional with any questions about your deductions.

What can you buy with the IRS per diem?

The per diem rates represent what the government predicts will be the average cost of lodging and eating in a given locality. For 2018, the default rate in the continental US is $93 for lodging and $51 for M&IE. Those are your 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.” For 2018, the GSA identified 332 such areas in the continental US, and for each, calculated a lodging and M&IE rate.

The full list of 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. As you’ll see, the per diem rates are typically more than adequate for travelers to enjoy reasonable (if not lavish) meals and accommodations.

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 2018 rates.

City data provided by PriceOfTravel.com, Expatistan.com, and Numbeo.com. Per diem rates available at GSA.gov.

New York City: $74 M&IE, $253 lodging

  • Average business district lunch: $15
  • Meal, Inexpensive restaurant: $19.50
  • Price range of 3-star hotels: $206 – $510

The nation’s largest city boasts a nearly unlimited variety of accommodations, including many affordable eateries that let you stretch your meal budget with ease.

San Francisco: $74 M&IE, $276 lodging

  • Average business district lunch: $16
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $180 – $350

Arguably the most expensive city in the US, San Francisco travelers need to find meals and lodging in a dense area. Luckily for cost-conscious businesses, many nearby cities are more affordable.

Washington, DC: $69 M&IE, $225 lodging

  • Average business district lunch: $14
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $72 – $270

This area also accounts for 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.

Las Vegas: $64 M&IE, $106 lodging

  • Average business district lunch: $13
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $57 – $182

One of the most popular convention locations in the country, Las Vegas is a business-friendly city built to accommodate short-term travelers.

Orlando: $59 M&IE, $129 lodging

  • Average business district lunch: $13
  • Meal, Inexpensive Restaurant: $14.50
  • Price range of 3-star hotels: $50 – $98

Another mainstay of business travel, Orlando’s lodging per diem is fairly cushy compared to the city’s actual cost of accommodations. Maybe the GSA took Disneyland into account.

Chicago: $74 M&IE, $204 lodging

  • Average business district lunch: $14
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $156 – $285

Chicago combines a centralized business district with a large metropolitan area and ample public transportation, making business accommodations easy to find in any price range.

Los Angeles: $64 M&IE, $173 lodging

  • Average business district lunch: $15
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $80 – $275

Lodging costs fluctuate widely in LA, but the expense of ground transportation must be considered in a decentralized city this reliant on cars.

Boston: $69 M&IE, $267 lodging

  • Average business district lunch: $16
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $132 – $210

Boston proper is a small city with relatively expensive accommodations in its business district. Nearby Middlesex County is cheaper—hence that county’s $150 lodging per diem.

Philadelphia: $64 M&IE, $148 lodging

  • Average business district lunch: $15
  • Meal, Inexpensive Restaurant: $15
  • Price range of 3-star hotels: $109 – $259

Though Philadelphia County is large and economically diverse, the IRS rate does well to reflect the cost of lodging in Center City, the main district for large companies and startups alike.

Dallas: $64 M&IE, $149 lodging

  • Average business district lunch: $14
  • Meal, Inexpensive Restaurant: $12
  • Price range of 3-star hotels: $104 – $179

Dallas’ per diem stretches among the furthest of any big city, with lodging and meal rates at the higher end of the business travel market.

High-Low per diems

In addition to these city-specific per diems, the IRS also permits businesses to claim deductions using the High-Low method of substantiation. In this even simpler system, the IRS sets a flat rate of per diems for areas identified as “high-cost,” and applies a second set of “low-cost” per diems to all other areas.

In 2018, the high-cost per diem is $284: $68 for meals and $216 for lodging. The low-cost per diem is $191: $57 for meals and $134 for lodging. You can see the full list of areas on page 3 of the IRS’ official announcement.

If that high-cost standard per diem seems low compared to the city-specific rates listed above—which apply to the places that host a large percentage of business travel in the US—it won’t be surprising to note that the high-low substantiation method nearly went extinct in 2011, after the IRS noticed that few firms were using it. Enough public outcry kept it around, but it’s not commonly used.

Real time helps you claim per diem deductions

While the reporting requirement for the standard per diem deduction is lower than a totally itemized claim, you still need to substantiate the expenses—especially if you additionally deduct other common travel expenses, like meals & entertainment.

With real time expense reporting, employees get in the habit of submitting complete expense records for every transaction they make on the road, at the moment of purchase. Travel expenses get automatically organized into trips that finance team members can review and analyze in convenient dashboards. Whatever deductions your company decides to take, real time expense automation makes your life easier by collecting all the information you need from employees, freeing you to file with the IRS however makes sense for your business.

Learn more about how real time expense reporting can save you time and headache on travel expenses.

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