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IRS Adds New Cities to Per Diem Rate Changes

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Oct 16th 2017
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The IRS has issued new per diem rates for taxpayers traveling on business to use in substantiating ordinary and necessary expenses and changes include additional locations.

The annual 2017-2018 rates pertain to the special transportation industry meal and incidental expenses (M&IE) rates, the rate for the incidental-expenses-only deduction, and the rates and list of high-cost localities.

The rates took effect Oct. 1 and conclude on Sept. 30, 2018.

Taxpayers who use the new rates and localities list in the latest notice must also comply with Revenue Proclamation 2011-47, which provides general rules for per-diem rates for lodging, meals and incidental costs incurred during business travel.

Here’s a snapshot of what’s covered:

  • Incidental expenses. After Rev. Proc. 2011-47 was published, the General Services Administration published final regulations that revised how incidental expenses were defined under the Federal Travel Regulations. Thus, only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships were included. Transportation between places of lodging or business and places where meals are eaten, and the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings, are no longer included. Taxpayers who use the per diem rates may separately deduct or be reimbursed for transportation and mailing expenses. The rate is $5 per day for travel within or outside of the continental U.S.
  • Transportation industry. M&IE rates for taxpayers in the transportation industry are $63 for travel within the continental U.S. and $68 for travel outside the U.S.
  • High-low substantiation. Per-diem rates are $284 for travel to any high-cost localities and $191 for travel to other areas within the continental U.S. The rates include $68 for meals in high-cost localities and $57 for other localities within the continental U.S. The notice includes a list of 19 high-cost cities and counties in which the per-diem rate is $238 or more, and the localities are considered high-cost for all or part of the year. As to be expected, the locations are hotspots for tourism and business travel (many of the ski areas in Colorado, for example, while only Chicago is listed under Illinois and only Bar Harbor is listed in Maine.) The following locations have been added: Oakland, California; Lewes, Delaware; Fort Myers, Florida; Hyannis, Massachusetts; Petoskey, Michigan; Portland, Oregon; and Vancouver, Washington. Some localities have changed the time of year during which they are considered high cost. At the same time, high-cost localities that have been removed are Sedona, Arizona; Los Angeles, California; Vero Beach, Florida; and Kill Devil, North Carolina. The IRS has issued new per-diem rates for taxpayers traveling on business to use in substantiating ordinary and necessary expenses and changes include additional locations.

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