Summary
Per diem is Latin for "per day" and, in employment, means a fixed daily allowance an employer pays to cover lodging, meals and incidental expenses while an employee travels for work, instead of reimbursing each receipt. For travel from October 1, 2026 to September 30, 2027, the federal standard rate in the continental US is $113 a night for lodging and $68 a day for meals and incidentals, with higher rates in about 295 high-cost areas; the IRS high-low method simplifies that to $329 a day for high-cost localities and $230 everywhere else. Per diem paid under an accountable plan, at or below the federal rate and backed by a record of time, place and business purpose, is not taxable wages. The term also describes per diem employment: workers hired day by day, as needed, usually without benefits.
Per diem is only tax-free when the employer can show the employee was actually away on business on the days paid. E-Monitor's GPS tracking and time tracking produce the dated travel and work record an accountable plan relies on. Start free →
Per Diem Meaning
Per diem (Latin: "by the day") is a daily allowance paid to an employee to cover the ordinary costs of travelling away from home for work. Rather than collecting receipts for every meal and coffee, the employer pays a fixed amount per day of travel, and the employee keeps any difference between the allowance and what they actually spent. Per diem can cover meals and incidental expenses (M&IE) only, with lodging reimbursed at cost, or it can cover lodging, meals and incidentals together. Note that per diem does not cover personal vehicle expenses. If employees or 1099 contractors drive their own vehicles for business travel, those miles are usually reimbursed or deducted separately at the IRS standard mileage rate.
The word has a second meaning in staffing. A per diem employee is engaged day by day, as needed, rather than on a fixed schedule. Per diem nurses, substitute teachers and on-call technicians are common examples. They are usually paid a higher hourly rate in exchange for no guaranteed hours and few or no benefits. This guide covers both, starting with the travel allowance, which is what most employers mean.
Per diem is also different from a stipend, which is a fixed payment for a purpose such as a home-office or wellness allowance, and is almost always taxable wages because it is not tied to substantiated business travel.
Per Diem Rates for 2027 (October 2026 to September 2027)
Most private employers set their per diem by reference to the federal rates, because paying at or below them is what keeps the allowance tax-free with the least paperwork. Two sets of numbers matter.
| Rate | Lodging | Meals and incidentals | Total per day |
|---|---|---|---|
| GSA standard CONUS rate, FY2027 | $113 | $68 | $181 |
| GSA standard rate, FY2026 (for comparison) | $110 | $68 | $178 |
| IRS high-low, high-cost localities | Included | $86 | $329 |
| IRS high-low, all other CONUS localities | Included | $74 | $230 |
| Incidental expenses only | - | $5 | $5 |
The GSA rates are set by the General Services Administration for federal employees and published by city and county. FY2027 rates took effect on October 1, 2026: the standard lodging cap rose $3 to $113, the standard M&IE stayed at $68, and about 295 non-standard areas such as New York City, San Francisco and Boston have higher caps. M&IE comes in five fixed tiers: $68, $74, $80, $86 and $92.
The IRS high-low method, set each year in an IRS notice (Notice 2026-60 for the current period), replaces the city-by-city lookup with two flat combined rates: $329 a day for a published list of high-cost localities and $230 a day for everywhere else in the continental US. A locality is high-cost when its federal rate is at least $280. Employers who used the earlier rates ($319 and $225) for the first nine months of 2026 may keep them for October to December 2026 travel, provided they do so consistently for all employees.
Rates outside the continental US (Alaska, Hawaii, US territories) are set by the Department of Defense, and foreign rates by the State Department.
Is Per Diem Taxable?
Per diem is not taxable income to the employee, and is not subject to income tax withholding, Social Security or Medicare, when it is paid under an accountable plan. An accountable plan has three requirements:
- Business connection. The travel must be away from the employee's tax home, overnight or long enough to require rest, for the employer's business.
- Substantiation. The employee must account for the time, place and business purpose of each trip within a reasonable period, normally 60 days. With per diem, the amount of meals and lodging is deemed substantiated up to the federal rate, so receipts are not needed, but the dates, location and purpose still are.
- Return of excess. Advances that exceed the substantiated amount must be returned within a reasonable period, normally 120 days.
Per diem becomes taxable in three situations. Amounts paid above the federal rate are taxable wages and reported on the employee's W-2. Allowances paid without substantiation of time, place and purpose are treated as paid under a nonaccountable plan, and the whole amount becomes wages. Allowances paid for days the employee was not actually travelling are wages. The most common audit finding is the second: a flat weekly "travel allowance" paid regardless of where the employee was.
Self-employed people and 1099 contractors can use the M&IE rate, not the lodging rate, to deduct meal expenses without keeping receipts. Our guide to 1099 vs W-2 workers covers the wider tax differences.
How to Calculate Per Diem
Full travel days. Multiply the number of full days by the daily rate for the destination. Five full days in a standard-rate city at the FY2027 rate is 5 × $68 = $340 for M&IE, plus lodging up to $113 a night or at cost.
First and last days. The federal rule, which the IRS accepts for private employers, pays 75% of the M&IE rate on the day of departure and the day of return. At $68, that is $51. A trip leaving Monday morning and returning Friday evening therefore pays three full days and two partial days: (3 × $68) + (2 × $51) = $306.
Meals provided. Where a conference or client provides a meal, the federal rules deduct a set amount for breakfast, lunch or dinner from that day's M&IE. Many private employers apply the same deduction to avoid paying an allowance for a meal that was free.
Lodging. Most employers reimburse actual lodging up to the cap and pay M&IE as a flat allowance, because hotel rates vary more than meals. Lodging per diem without receipts is allowed for employees but not for the self-employed.
Writing a Per Diem Policy
- Who qualifies: employees travelling overnight away from their tax home on company business.
- Rates: the GSA rate for the destination, or the IRS high-low rates; state which, and apply it consistently.
- Partial days: 75% of M&IE on travel days, with deductions for provided meals.
- Substantiation: a trip report giving dates, destination and purpose within 60 days; lodging receipts if lodging is reimbursed at cost.
- Excess: unspent advances returned within 120 days.
- Long assignments: travel to one location expected to last more than a year is not temporary, so per diem becomes taxable from the start.
Travel-heavy roles raise the same question for every employer: was the employee where the trip report says, on the days it says? Our guide to monitoring business travellers covers how to verify that without tracking employees off duty.
Per Diem Employees: Pay, Benefits and Rules
A per diem worker is an employee, not a contractor, and is owed minimum wage and overtime like anyone else. What makes the arrangement per diem is the absence of a fixed schedule: the employer offers shifts when needed and the worker accepts or declines. Hospitals, schools, home health agencies and event companies rely heavily on per diem staff to cover absences and peaks.
Per diem hourly rates are typically set well above the equivalent staff rate, to compensate for the lack of benefits and guaranteed hours. Benefits eligibility still depends on hours actually worked: an employer with 50 or more full-time equivalents must offer health coverage to anyone averaging 30 hours a week under the Affordable Care Act, whatever their title, and 401(k) plans must admit workers with 1,000 hours in a year, as our guide to part-time hours explains. Tracking per diem hours accurately is therefore not only a payroll question but a benefits-eligibility one.
Related reading: What Is Time and a Half?, Biweekly vs Semi-Monthly Pay, What Is Leaveism?.
Frequently Asked Questions
1. What does per diem mean?
Per diem is Latin for "per day." In employment it means a fixed daily allowance for lodging, meals and incidental expenses while travelling for work, or a worker employed day by day, as needed.
2. What is the per diem rate for 2027?
For October 1, 2026 to September 30, 2027, the GSA standard rate in the continental US is $113 for lodging and $68 for meals and incidentals, $181 a day in total. Higher rates apply in about 295 high-cost areas. The IRS high-low rates are $329 for high-cost localities and $230 elsewhere.
3. Is per diem taxable?
Not when paid under an accountable plan at or below the federal rate, with the employee substantiating time, place and business purpose. Amounts above the federal rate, or paid without substantiation, are taxable wages.
4. How is per diem calculated on travel days?
The day of departure and the day of return are paid at 75% of the meals and incidentals rate. At the $68 standard rate, each travel day pays $51.
5. Do I need receipts for per diem?
Not for meals and incidentals paid at or below the federal rate. You still need to record the dates, destination and business purpose of the trip. Lodging reimbursed at actual cost requires receipts.
6. Is per diem the same as a stipend?
No. Per diem is tied to substantiated business travel and is tax-free within the federal rates. A stipend is a fixed payment for a general purpose, such as a home-office allowance, and is usually taxable wages.
7. What is a per diem employee?
A worker hired on an as-needed basis without a fixed schedule, common in healthcare and education. They are employees owed minimum wage and overtime, usually paid a higher rate in place of benefits.
8. Do per diem employees get benefits?
Often not by policy, but eligibility depends on hours worked. An employee averaging 30 hours a week may be owed health coverage under the ACA, and one working 1,000 hours a year may become eligible for the 401(k) plan.
A dated record behind every day of per diem. E-Monitor's time tracking and GPS tracking record when and where employees worked on the road, so each per diem day is backed by the time, place and business purpose an accountable plan requires. 7-day free trial, no credit card. Sign up →