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Lodging carries the per diem increase; meals stay put

The new substantiation rates pay more for the room and nothing extra for the plate, reshuffling which per-diem clients actually come out ahead.

At a glance

  1. The new rates take effect Oct. 1 and stand in place of the per diem rates in last year's Notice 2025-54; they are the numbers a client's written policy can lean on instead of receipts for lodging, meals, and incidentals.
  2. The locality list is where the mechanical work sits, and the notice caps it at places carrying a federal per diem rate of $280 or more.
  3. The case for the shortcut got weaker on meals, and for a client whose travel year runs meal-heavy, the per diem method is relatively less generous than it was a year ago; the receipt file is worth more than the method.

Notice 2026-60, first reported by Financial Planning, raises the high-low substantiation ceiling to $329 a day from $319 in high-cost localities and to $230 from $225 in all other continental U.S. localities. The new rates take effect Oct. 1 and stand in place of the per diem rates in last year's Notice 2025-54; they are the numbers a client's written policy can lean on instead of receipts for lodging, meals, and incidentals.

Everything else held. The portion of the high and low rates treated as paid for meals for Section 274(n) stays at $86 in high-cost localities and $74 elsewhere; the incidental-expenses-only deduction remains $5 a day whether the travel is inside or outside the continental U.S.; and the transportation industry's special meals and entertainment rate is unchanged at $80 within the continental U.S. and $86 outside it. That outside-CONUS figure is a separate provision that happens to land on the same number as the high-cost meal allocation.

The locality list is where the mechanical work sits, and the notice caps it at places carrying a federal per diem rate of $280 or more. Sending a client from a listed city to an unlisted one is a $99-a-day swing in substantiated expenses, and the high-low method only produces that number if the reimbursement policy names it. Clients who run operating companies, sit on outside boards, or bill travel back to their own entities should have the election written down rather than improvised on an expense report; because the notice runs October through September, travel that straddles the switch, or any client whose fiscal year does, will put two rate sets in one ledger.

The case for the shortcut got weaker on meals, and for a client whose travel year runs meal-heavy, the per diem method is relatively less generous than it was a year ago; the receipt file is worth more than the method. The high rate rose because lodging rose; the meal allocation, the incidental rate, and the transportation rate did not. For a hotel-heavy client, the arithmetic runs the other way, and the gap between per diem and actual-expense substantiation just widened in that client's favor. Tax planning has become a matter of written policy rather than a seasonal checklist, as this publication has argued, and the per-diem election is the policy decision in question: it is made once in the policy, and it either matches where the client actually sleeps or it quietly under-reimburses them all year.

Pull the high-cost list, match it against where clients actually slept over the last twelve months, and reset the policy before the first October trip reaches the ledger.

Reported by the Tax & estate planning desk from Financial Planning. Published . Corrections

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