IRS Raised Its Business Travel Per Diem Rates for October 2026: What Self-Employed Filers and W-2 Workers Need to Know

The IRS quietly raised its business travel per diem rates on October 1, 2026, and if you travel for work, the change affects how much you can deduct or be reimbursed without saving a single receipt. The update comes from IRS Notice 2026-60, published in late September, and it covers the full travel year running through September 30, 2027. Whether you are self-employed, a gig worker, or a W-2 employee whose company pays you a daily travel allowance, here is what the new numbers mean for you.

What IRS Notice 2026-60 Actually Changed

Each year the IRS announces special per diem rates taxpayers can use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home. “Substantiate” is IRS language for “prove to the IRS that your expense was real and business-related.” Per diem rates make that easier by letting you use a fixed daily dollar amount instead of tracking every hotel bill and meal receipt.

Beginning October 1, 2026, the high-low per diem rate that can be used for lodging, meals, and incidental expenses increases to $329 for travel to high-cost localities and $230 for travel to other localities, up from $319 and $225, respectively. That is a $10 increase for high-cost cities and a $5 increase for everywhere else.

Per diem rates offer a simplified alternative to tracking and documenting actual travel costs. Rather than saving every receipt, employers and employees can reimburse, and self-employed taxpayers can deduct, travel expenses using a fixed daily allowance.

The High-Low Method: Two Rates, All of the Continental US

The rates above use what the IRS calls the high-low substantiation method. The idea is straightforward. Instead of tracking a different rate for every destination, the method divides travel within the continental US into two categories: designated high-cost localities and everywhere else.

For the new rate year, a locality is considered high-cost if it has a federal per diem rate of $280 or more, up from $272 last year. The notice updates the high-cost localities by adding Tucson, Arizona; San Mateo/Foster City/Belmont, California; Albuquerque, New Mexico; and Cody, Wyoming, and removing Panama City, Florida.

It is also worth knowing that a city does not necessarily hold high-cost status for the full year. Philadelphia, for example, is considered a high-cost locality from October 1 through November 30 and from September 1 through September 30 under the new notice. That is a good reminder that a locality does not necessarily have high-cost status all year. Always check the current list before you file.

Here is a quick summary of the new rates under Notice 2026-60:

Category	Rate (10/1/26 to 9/30/27)
High-cost locality (lodging + meals + incidentals)	$329 per day
All other CONUS localities (lodging + meals + incidentals)	$230 per day
Meals and incidental expenses only, high-cost	$86 per day
Meals and incidental expenses only, other localities	$74 per day
Transportation industry M&IE (within continental US)	$80 per day
Transportation industry M&IE (outside continental US)	$86 per day
Incidental expenses only (any locality)	$5 per day

What This Means If You Are Self-Employed or a Gig Worker

If you file a Schedule C, you are your own employer, which means you set your own travel reimbursement policy. You can use the IRS per diem rates to calculate your travel deduction instead of adding up actual costs. That can save you significant time and headache at tax time.

There is one important limit to keep in mind. The meal portion is still subject to the 50 percent deduction limit under Section 274(n), which is why the notice states the $86 and $74 figures separately: that is the base the 50 percent applies to. So even if you are in a high-cost city and your daily rate is $329, only half of the $86 meals portion is deductible as a business expense.

Using per diem rates does not mean you can skip all record-keeping. Employers using these rates to set per diem allowances can treat certain categories of travel expenses as substantiated without requiring that employees prove the actual amount they spent. Employees must still substantiate the time, place, and business purpose of their travel expenses. The same applies to self-employed filers. Keep a log showing the date, the destination, and the business reason for each trip.

What This Means If You Are a W-2 Employee

If your employer pays you a daily travel allowance, your company may be using these IRS per diem rates to calculate what you receive. Generally, under the per diem substantiation method, if an employer or other payer pays a per diem allowance in lieu of reimbursing an employee’s actual expenses for lodging, meals, and incidental expenses, the amount deemed substantiated for each calendar day is the lesser of the allowance amount for that day or the amount computed under federal per diem rates for the place of travel within the continental United States.

In plain terms: if your employer pays you exactly the IRS rate or less, that reimbursement is generally not taxable income to you. If your employer pays you more than the IRS rate, the excess is treated as wages and is taxable. Employees should continue to keep records showing where they traveled, when they traveled, and the business purpose of the trip.

If you are in the transportation industry, the rates that apply to you are different. The special meals and incidental expenses per diem rates for taxpayers in the transportation industry are unchanged from the previous year: $80 for any locality of travel within the continental US and $86 for any locality of travel outside the continental US.

Per Diem Rates and Unfiled or Back Taxes: A Connection Worth Understanding

If you have years of unfiled returns or owe back taxes, per diem deductions you missed in previous years may have left money on the table. Under-reporting legitimate business expenses can inflate your taxable income, which increases your assessed tax debt. That higher number is then what the IRS uses when it sends notices, files a substitute return on your behalf, or pursues collections.

A substitute return, which the IRS files when you have not filed your own, typically does not include deductions you are entitled to. That means the IRS may be holding you to an inflated bill. Amended returns can sometimes correct this, but the rules around amended filings are strict and time-sensitive.

The use of a per diem substantiation method is not mandatory. Taxpayers can substantiate the actual allowable expenses if they maintain adequate records or other sufficient evidence for proper substantiation. If you have receipts, you can still use the actual-expense method. If you do not, the per diem method may be the only viable path, and knowing the correct rate matters.

What to Do Next If You Have a Tax Problem

Understanding the new per diem rates is a good first step, but if you are also dealing with unfiled returns, IRS notices, or a balance you cannot pay, knowing the rates will only take you so far. The IRS has several programs, including installment agreements, offers in compromise, and currently-not-collectible status, that may be available to taxpayers depending on their circumstances. What you may qualify for depends on your income, your expenses, your filing history, and other factors specific to your situation.

At Clear Start Tax, we work directly with individuals and businesses who owe the IRS or state tax agencies and need real help, not confusion. Our team can review your situation, identify which relief options you may be eligible for, and help you take action before the IRS does. If you have been putting off a tax problem, the right time to address it is before a lien, levy, or garnishment forces your hand.

Reach out to Clear Start Tax today for a free consultation. There is no obligation, and everything you share is confidential.