IRS Announces New Per Diem Rates For Taxpayers Who Travel For Business (But Watch Out For Tax Law Changes)
Wondering about those updated per diem rates? The new per-diem numbers are now out, effective October 1, 2018. These numbers are to be used for per-diem allowances paid to any employee on or after October 1, 2018, for travel away from home on or after that date. The new rates include those for the transportation industry; the rate for the incidental expenses; and the rates and list of high-cost localities for purposes of the high-low substantiation method.
I know: That sounds complicated. But it’s intended to keep things simple. The Internal Revenue Service (IRS) allows the use of per diem (that’s Latin meaning “for each day” – remember, lawyers love Latin) rates to make reimbursements easier for employers and employees. Per diem rates are a fixed amount paid to employees to compensate for lodging, meals, and incidental expenses incurred when traveling on business rather than using actual expenses.
Here’s how it typically works: A per diem rate can be used by an employer to reimburse employees for combined lodging and meal costs, or for meal costs alone. Per diem payments are not considered part of the employee’s wages for tax purposes so long as the payments are equal to or less than the federal per diem rate and the employee provides an expense report. If the employee doesn’t provide a complete expense report, the payments will be taxable to the employee. Similarly, any payments which are more than the per diem rate will also be taxable.
The reimbursement piece is huge because there is a big change this year in the way that employees may report their expenses. For the 2017 tax year, unreimbursed job expenses were deductible on Schedule A as miscellaneous deductions subject to the 2% floor. That means that they were deductible to the extent that they exceeded 2% of your adjusted gross income (AGI). Here’s an example: Let’s say that your AGI in 2017 was $50,000 and your job-related expenses totaled $3,000 for that year. For the 2017 tax year, you could have deducted $2,000 of those expenses. That’s because 2% of $50,000 is $1,000, and expenses over that amount ($3,000 less $1,000 = $2,000) would have been deductible.
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Shared from: Forbes.com