October 11, 2021 1:27 am

Hi-Low Substantiation Rates for Business Travel

Employers that want to use a per diem rate to reimburse employees’ lodging, meals, and incidental expenses on business trips within the continental U.S. (CONUS) can use either the IRS’s high-low method or a reimbursement rate provided by the General Services Administration (GSA) used by the federal government to reimburse federal employees at https://www.gsa.gov/travel/plan-book/per-diem-rates. These rates run on the government’s 2022 fiscal year beginning October 1, 2021.

The IRS has announced its rates for the high-low substantiation method beginning October 1, 2021, through September 30, 2022 (Notice 2021-52). If these rates are used, the costs are considered substantiated (no receipts are required) as long as the employee is not related to the employer. The list of high-cost areas has changed somewhat since the last fiscal year.

  • The following locality has been added to the list of high-cost localities: Hilton Head, SC.
  • The following locality has changed the portion of the year in which it is a high-cost locality: Jamestown/Middletown/Newport, RI.
  • The following locality has been removed from the list of high-cost localities: Gulf Breeze, FL.

For designated high-cost areas within CONUS, the per diem rate effective October 1 is $296 (up from $292). For all other CONUS areas, the so-called low-cost rate is $202 (up from $198). The portion of the $296 high-cost area rate for meals is $74, while $64 of the $202 rate is treated as paid for meals (up from $71 and $60, respectively, in the prior fiscal year). If meals are not provided at restaurants, then only 50% of the cost is deductible.

Employees and self-employed individuals in the transportation industry (e.g., long-haul truckers) may use a flat rate for deducting meals and incidental expenses. The rate starting October 1, 2021, is $69 for CONUS and $74 for any travel outside of CONUS (up from $66 and $71, respectively, in the prior fiscal year).

Note: Self-employed individuals cannot use the high-low method. They must substantiate actual lodging costs but can rely on the GSA per diem rate for meals.

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Tax Glossary

Lump-sum distribution

Payments within one tax year of the entire amount due to a participant in a qualified retirement plan. Qualifying lump sums may be directly rolled over tax free, or, in some cases, are eligible for current tax under a favorable averaging method.

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