The 2026-2027 IRS Per Diem Rates Are Live: Your Q4 Travel Policy Check-Up

Every October 1, the federal government quietly resets the price of a business trip. This year the reset came with IRS Notice 2026-60, which sets the special per diem rates for travel from October 1, 2026 through September 30, 2027. It landed in late September, and the Journal of Accountancy and Thomson Reuters both covered it.

Per diem notices rarely make headlines. They should get more attention from finance and HR teams than they do. The rates themselves moved only modestly, but the notice also starts a three-month transition window, and the choices you make in that window have to be applied consistently. Get it wrong and a tidy, tax-free allowance can turn into taxable wages.

I have written plenty about mileage rates on this site. Per diem is the other half of the travel reimbursement chart, and it is overdue for an exam.

The Vital Signs: What Changed on October 1

The headline numbers are for the high-low method, the simplified approach where an employer uses just two daily rates for all travel in the continental US (CONUS) instead of looking up every city. Per the notice:

• High-cost localities: $329 per day for lodging, meals and incidentals, up from $319.
• All other CONUS localities: $230 per day, up from $225.
• Meal portion (for the 50% meal deduction limit): $86 for high-cost areas and $74 for everywhere else. Both are unchanged from last year.
• Meals and incidentals only (M&IE-only method): the same $86 and $74.

Two other rates held steady. The special transportation industry M&IE rate stays at $80 inside CONUS and $86 outside it, and the incidental-expenses-only rate stays at $5 per day.

The bar for being "high-cost" moved too. A locality qualifies if its federal per diem rate is at least $280, a threshold that Current Federal Tax Developments notes rose from $272. With that change:

• Added to the high-cost list: Tucson, AZ; San Mateo/Foster City/Belmont, CA; Albuquerque, NM; and Cody, WY.
• Removed: Panama City, FL.
• Seasonal periods changed for 15 localities, including New York City, Philadelphia, Napa and Aspen.

If you use the full federal rate tables instead of high-low, the General Services Administration (GSA) sets those. For fiscal 2027, the standard CONUS lodging rate rose to $113 a night from $110, and the standard M&IE rate is $68 a day, according to this summary of the GSA release.

The Diagnosis: Small Raises, Real Consequences

A $10 bump on the high rate will not break anyone's travel budget. The risk sits elsewhere: in your expense system's configuration, and in the transition rules most people never read.

The IRS rules for using per diem rates live in Revenue Procedure 2019-48, and the new notice points back to it. Here are the parts that matter for the rest of this year.

The October-to-December transition window

Because the per diem year runs October to September but your payroll year runs January to December, the IRS gives payors a choice for the last three months of the calendar year:

1. Keep last year's rates (from Notice 2025-54) and the old high-cost list through December 31, 2026, or
2. Switch to the new rates and the new list as of October 1, 2026.

The catch: whichever option you pick, you must apply it consistently to every employee you reimburse under the high-low method. You cannot use the new $329 rate for the sales team's New York trips and the old rates for everyone else.

There are two more constraints. If you used high-low for the first nine months of the year, you have to keep using it for the last three. You cannot jump to a different method mid-year. And Rev. Proc. 2019-48 says that once you use high-low for an employee, you must use it for all of that employee's CONUS travel for the calendar year. Transportation industry employers face a similar lock: you cannot move an employee between the special transportation rates and the regular federal M&IE rates until January 1.

The symptom nobody notices: silent config drift

Most modern expense platforms load the federal rate tables automatically. That is good medicine, but it creates a quiet risk. If your system updated on October 1 and your written policy still says "we follow last year's rates through December," your policy and your practice no longer match. Worse, if some per diems were paid manually or through a separate travel tool, you may have applied both rate sets at once without meaning to.

Neither situation is a disaster on its own. Both are exactly the kind of inconsistency an auditor likes to find.

Why the Accountable Plan Is the Vital Organ

Per diem only works as a tax-free benefit because of the accountable plan rules. Per Rev. Proc. 2019-48, a per diem paid at or below the federal rate is treated as substantiated for the amount. Your employees still have to substantiate the time, place and business purpose of each trip within a reasonable period. A per diem does not remove the need for a trip record. It only removes the need for meal and hotel receipts at or below the rate.

Pay more than the federal rate, and the excess must either be returned or treated as wages. Under the revenue procedure, an unreturned excess is paid under a nonaccountable plan: it goes on the Form W-2 and is subject to income tax withholding and employment taxes. The portion up to the federal rate stays tax-free if the trip is properly documented.

A few more rules from the same revenue procedure often catch smaller companies:

• Related parties. The lodging-inclusive per diem methods, including high-low, are not available when the employer and employee are related under the tax code's related-party rules, using a 10% ownership threshold. If your founders or major shareholders travel on per diem, check this before the next trip.
• No phantom hotels. A per diem for lodging assumes the traveler actually paid for lodging. If the company booked and paid the hotel directly, the allowance should be meals and incidentals only.
• Travel days. For the first and last day of a trip, the payor may prorate by paying three-quarters of the daily rate, or use another reasonable method applied consistently.
• No double dipping. Meals covered by a per diem generally cannot also be reimbursed as separate business meals.

One more point for HR teams fielding questions. As Thomson Reuters notes, employees generally cannot deduct unreimbursed travel costs on their own returns. If the company does not reimburse it, the employee usually eats the cost. That makes your per diem policy a real pay issue, not just a tax issue.

The Prescription: A Five-Step Q4 Check-Up

Do these steps before the next expense cycle closes.

1. Make the transition decision. Choose old rates or new rates for October to December. Write the decision down. Tell payroll, AP and your travel team.
2. Check your expense system. Confirm which rate table is active and the date it took effect. Make sure it matches your decision. Do this for every tool that pays per diem, including any travel platform.
3. Check the high-cost list. If your employees travel to Tucson, San Mateo, Albuquerque or Cody, the high-low rate for those places changed. If they travel to Panama City, FL, it went down. Check seasonal dates for cities such as New York and Philadelphia.
4. Audit excess payments. Find any per diem paid above the federal rate. Make sure the excess is returned or reported as wages on the W-2.
5. Review who gets per diem. Remove owners with 10% or more from lodging per diems. Remove the lodging portion when the company pays the hotel directly.

If your platform enforces these limits automatically, so much the better. My guide to policy enforcement in expense software [blocked] covers how to build these rules into the approval flow instead of catching them after payment. And if your per diem data has to reach payroll for W-2 reporting, the integration matters. See my surgical guide to ERP integration [blocked].

What This Does Not Tell You

Notice 2026-60 sets the tax treatment. It does not set your policy. Nothing requires you to pay the full federal rate. Some companies pay less, and some pay more and report the difference as wages. The notice also says nothing about state law. In states with strong reimbursement statutes, such as California, the question of whether your allowance actually covers an employee's necessary costs is separate from the federal tax question. My piece on California mileage compliance [blocked] explains why the federal rate is not a safe harbor there.

Finally, this is not tax advice for your specific situation. The revenue procedure has more detail than any blog post can hold. Bring your tax adviser into the transition decision.

The Doctor's Verdict

The 2026-2027 per diem rates are a mild dose: $10 more per day in high-cost cities, $5 more elsewhere, meal portions unchanged. The rates are not the danger. The danger is inconsistency during the October-to-December transition, and per diems that slip outside the accountable plan rules without anyone noticing.

Diagnosis: a routine annual update with a hidden consistency trap. Prescription: pick your transition option, align your systems to it, and audit excess and related-party payments before year-end. Prognosis: excellent, for the teams that make the decision on purpose instead of letting their software make it for them.