IRS and GSA Per Diem Rates for FY 2027: What Changed

For FY 2027, GSA raised the standard lodging rate by $3 to $113 and left meals and incidentals at $68. The new rates apply to travel from October 1, 2026 through September 30, 2027.

Each year, the General Services Administration (GSA) sets federal per diem rates for lodging, meals, and incidentals, and the IRS follows with its own notice on the simplified high-low method. On September 10, 2026, GSA published the FY 2027 rates: the standard lodging cap rises from $110 to $113, the standard M&IE stays at $68, and 295 non-standard areas keep their own higher caps. The IRS notice for the 2026-2027 period had not been published as of September 17, 2026; last year's arrived September 23.

After a one-year freeze, the increase is modest, but it is not uniform. Our comparison of GSA's two rate files found 258 of 294 non-standard areas raised their peak lodging cap, 18 cut it, and 18 held flat, with a median increase of $7 a night. Our per diem rates by state guide has the destination-level detail.

FY 2027 Standard CONUS Per Diem Rate

High-Cost Areas in FY 2027

295 destinations carry lodging caps above the $113 standard for all or part of the year. The largest FY 2027 increases were Albuquerque ($144 to $208), San Francisco ($272 to $325), and Tucson ($171 to $208). Nashville, San Antonio, and Dallas saw their caps cut. Check the GSA lookup tool for the exact cap and season before booking.

Why Rates Went Up After the FY 2026 Freeze

GSA sets lodging caps from trailing average daily hotel rates in each market, minus five percent. FY 2026 was frozen at FY 2025 levels, so FY 2027 absorbs two years of hotel price movement at once. That is why a $3 standard increase sits alongside 20 to 44 percent jumps in a handful of markets.

For employers, budgets built on FY 2026 caps will run short in most cities from October 1. For travelers, the change is mostly good news: 258 of 294 non-standard areas pay more for lodging than they did last year.

How FY 2027 Compares to Prior Years

FY 2025 raised standard lodging from $107 to $110 and standard M&IE from $59 to $68, and widened the M&IE tier range to $68 to $92. FY 2026 froze everything. FY 2027 moves lodging to $113 and leaves M&IE and the tier range alone, so the meal side of per diem is now in its third year at the same levels.

FY 2025 also reshuffled which cities counted as high-cost. Newly added or newly timed high-cost localities included Los Angeles, Mammoth Lakes, Palm Springs, and South Lake Tahoe in California; Boise and Coeur d’Alene in Idaho; Bend, Oregon; and Burlington, Vermont. Cities that dropped back to standard rates included Fort Wayne, Indiana; Canton and Mentor, Ohio; East Greenwich and Warwick, Rhode Island; Waco, Texas; and Wisconsin Dells, Wisconsin. The agencies added no new non-standard areas for FY 2026.

How Per Diem Works

To recap, per diem is a daily allowance employers use to cover lodging, meals, and incidental expenses for employees traveling on official business. Instead of tracking every receipt, employers can rely on IRS-approved per diem amounts to streamline expense reporting and reimbursement.

• Lodging: Hotel costs per night
• Meals and Incidentals (M&IE): Daily allowance for meals, tips, and minor expenses
• CONUS vs. OCONUS: Rates differ for travel inside the continental U.S. versus overseas or non-continental territories

What This Means for Employers and Travelers

• Employers benefit from consistent budgeting and reimbursement policies year over year.
• Employees may need to plan carefully in higher-cost destinations where per diem limits may not fully cover real-world expenses.
• Government contractors continue to use per diem as the benchmark for lodging compliance and expense reporting.

The High-Low Substantiation Method

Instead of looking up an exact rate for every city, the IRS allows a simplified high-low method for expense substantiation. The IRS sets two flat rates: $319 per day for designated high-cost localities, and $225 per day for every other CONUS location. You classify each destination once and apply the matching rate going forward.

Check the current IRS high-cost locality list to see which destinations qualify. Cities like San Francisco, New York, Boston, and Washington, DC typically qualify as high-cost. Most other cities, including Phoenix, Nashville, and Kansas City, fall under the standard "other localities" rate.

The advantage of the high-low method is that it removes the need to look up individual city rates, which makes the policy easier to explain to travelers and easier for accounting to audit. The tradeoff is that you may overpay in some markets and underpay in others. That averaging effect works out fine if your organization travels to a broad, consistent mix of locations, but it is a weaker fit if most of your travel concentrates in one or two cities.

One limitation to flag for Finance: self-employed individuals and sole proprietors cannot use the high-low method for their own per diem deductions. They must use the standard, location-specific method. The high-low method is available to employers reimbursing employees, not to individuals substantiating their own return.

Field Operations and Crew Travel Guidance

Knowing the rate is only the starting point. The harder problem is building a per diem process that holds up when crews are spread across job sites, assignments change on short notice, and Finance still needs clean, auditable records.

Prepaid or Reimbursement

Prepaid per diem works better for longer projects, since crews should not have to front weeks of hotel and meal costs out of pocket. Reimbursement works fine for short trips where a few days of expenses will not strain a traveler’s personal finances.

For example, a 12-person crew working a three-week out-of-town project at the standard CONUS rate would need each member to front more than $3,700 individually under a pure reimbursement model. Prepaying, or covering lodging and incidentals directly through a booking platform, removes that burden. Booking extended-stay properties with weekly rates is one of the more reliable ways to keep real lodging costs under the daily allowance.

Using the High-Low Method for Crews That Move Often

When a team hits a different rate zone every few days, doing a fresh per-city lookup each time slows everyone down. Field teams with frequent location changes, such as multi-state installation or inspection crews, are usually better served by the high-low method described above: classify each stop as high-cost or standard once, then apply the flat rate without re-checking GSA tables on every trip.

Handling Multiple Locations in a Single Day

When one assignment spans more than one per diem rate zone, use the rate for wherever the crew sleeps that night, not the rate for the overall project’s home base. Multi-week rotational assignments in remote areas are a common case: a single project can cross two or three rate zones, so tracking per diem daily, rather than for the project as a whole, keeps reimbursements accurate.

Remote job sites also sometimes carry their own elevated per diem designations due to limited local lodging supply. Confirm the current rate on GSA.gov rather than assuming the standard CONUS rate applies.

Different Roles, Different Rates

Transportation industry workers who sleep in their vehicles (long-haul drivers, for example) use a separate, higher M&IE-only rate than employees who stay in hotels. Keep these policies clearly separated on mixed crews: a driver and an inspector on the same job may be entitled to different daily allowances, and conflating the two creates avoidable reconciliation headaches for Finance.

M&IE-Only for Day Trips

When employees drive to a site and return home the same night, use the meals-and-incidentals portion of the rate only. There is no lodging cost to reimburse. If circumstances change and the trip becomes an overnight stay, switch to the full per diem rate for that day.

Track Per Diem by Project, Not by Employee Alone

Set up your expense system to tag per diem spend by job or project code, not only by employee. Project-level tracking makes it possible to bill clients accurately and to see what a specific job actually cost, which a purely employee-level view cannot show.

This also supports the documentation Finance needs for IRS substantiation. A simple tracking sheet that records dates, locations, and project assignments alongside the per diem paid gives you an audit-ready record without adding a heavy approval process on top of it.

What Per Diem Covers and What It Doesn’t

Per diem is a fixed daily allowance for covered travel categories. Your policy should handle unrelated trip costs separately. When it follows the IRS substantiation rules, per diem lets employees skip documenting each covered meal or incidental dollar, while you still spell out lodging, M&IE, mileage, taxes, and other expenses clearly in policy.

What Per Diem Covers

• Lodging for overnight jobs, whether a hotel room, extended-stay property, or short-term rental near the job site
• Meals during travel days, including restaurant meals, room service, and groceries bought for eating in the hotel
• Incidental expenses, meaning small fees and tips to baggage handlers, hotel staff, and similar service workers
• Other travel costs your policy names, such as airport shuttles, parking, tolls, and transit

What Per Diem Doesn’t Cover

Handle mileage separately from per diem. When team members drive personal vehicles to project sites, reimburse them at the IRS standard mileage rate, which covers gas, wear and tear, and vehicle depreciation. You cannot cover mileage out of the per diem allowance.

• Alcohol purchases
• Entertainment expenses
• Personal items like souvenirs
• Anything unrelated to business needs

Tax Rules and Accountable Plan Requirements

Most operations and finance teams use the IRS per diem rate because the rate affects tax treatment, paperwork, and contractor deductions. Pay a team member $200 per day in a standard-rate location and they owe income tax on the extra $22, the amount above the $178 standard rate. Any amount above the applicable IRS special rate is generally taxable to the employee unless actual-expense rules support it.

Self-employed contractors must use the standard method, meaning exact rates by location, to claim per diem deductions. Individual tax returns cannot use the high-low method.

What an Accountable Plan Requires

To keep per diem payments non-taxable, you need an accountable plan. Under an accountable plan, employees must substantiate the time, place, and business purpose of the travel. Per IRS Publication 463, employees generally have 60 days to substantiate expenses. Excess or duplicate payments become taxable compensation.

Finance teams lose hours every month on this paperwork load, and it eases when lodging records and invoices stay tied to the right job, crew, or cost center. K&K Electric had weekly booking, credit card authorization, and folio reconciliation work; keeping lodging records and invoices together saved them 30 hours per month on booking and reconciliation.

A dedicated expense report template can keep travel expense details alongside the IRS-published rates in one place.

Per Diem Outside the Continental US

The GSA rates apply only to the 48 continental states and Washington, DC, and they vary widely by location. For the domestic breakdown, see our per diem rates by state guide. Teams working outside the lower 48 follow different rules, with different agencies setting the rates.

The Department of Defense, through its Defense Travel Management Office, sets rates for US territories and non-continental states, including Alaska, Hawaii, Guam, and Puerto Rico. These rates typically run higher than continental US rates because shipping costs and limited competition raise travel costs.

International projects use State Department rates, which vary by country and can change frequently with local economic conditions. A crew working in Germany faces different rates than one in Mexico. For a fuller breakdown, see our guide to international per diem rates.

Use the standard method for international and territory work. The high-low method only applies to continental US locations, so you will need exact rates for anything outside the lower 48. A single project that starts in Texas, runs through Alaska, and includes offshore work can need three different per diem systems, so track each overnight location and apply the correct agency’s rates for each.

Frequently Asked Questions Regarding Per Diem & the IRS