--- title: "Per diem" description: "Per diem is a daily allowance for lodging, meals and incidentals on work travel. How the federal rates work, the 75% travel-day rule and when it gets taxed." canonical: https://engine.com/glossary/per-diem updated: 2026-11-02 author: "Engine Editorial" --- # Per diem Per diem is a fixed daily allowance an employer pays for lodging and meals and incidental expenses (M&IE) when an employee travels away from home on business. Also called: per diem allowance Not to be confused with: a flat travel stipend paid whether or not anyone travels. Updated November 2, 2026 by Engine Editorial ## What is per diem? Per diem is a set amount per day of travel for the hotel, meals and incidentals, paid instead of reimbursing every receipt. This cheat sheet covers how to think about it, how travel days are figured and where it turns into taxable pay. The detail is further down. ### How to think about it - **It has two parts.** Under the federal rates, lodging is repaid at cost up to a nightly cap, and meals and incidentals are a flat daily amount. - **GSA sets the federal rates.** Every county gets a lodging cap and an M&IE rate each fiscal year, starting October 1. For FY2027, the standard rate is $113 a night for lodging and $68 a day for M&IE. - **Companies don't have to use them.** Federal employees follow the GSA table. Private companies don't have to, but many do, because the IRS treats per diem at or below the federal rate under an accountable plan as a reimbursement, not income. - **Travel days are partial days.** The M&IE rate is for a full day. On the day you leave and the day you return, the IRS lets employers pay 3/4 of the rate or use another method they apply consistently. ### The math M&IE for a trip = full days x the daily rate, plus 75% of the rate for the first and last day. A 3-day trip at the $68 standard M&IE rate pays $51 on day one, $68 on day two and $51 on day three, so $51 + $68 + $51 = $170. _Illustrative example using the FY2027 standard M&IE rate and GSA's first and last day amount. Under the federal rates, lodging is paid separately, at actual cost up to the nightly cap._ ### Where it turns into taxable pay - **Paying above the federal rate.** The amount up to the federal rate stays tax-free. The excess goes on the W-2 as wages. - **No trip report.** Under an accountable plan, the employee has to report the dates, place and business purpose of the trip within a reasonable time (60 days is a safe harbor). Payments that fail the rules are treated as wages. - **Same-day trips.** Travel counts as away from home only when the work needs a stop for sleep or rest. A long day trip doesn't qualify. - **Assignments over a year.** An assignment realistically expected to last more than 1 year is indefinite. The work site becomes the tax home, and living allowances paid there are income. ## Per diem vs. actual expense reimbursement | | Per diem | Actual expenses | | --- | --- | --- | | Meals and incidentals | A fixed daily allowance, no detailed receipts | A receipt for every meal, repaid at the exact amount | | If the traveler spends less | They keep the difference | They get back what they spent | | What finance checks | Travel dates and locations | Each itemized receipt | ## How it works on Engine Admins set [travel policies](https://engine.com/corporate-travel-policies) with nightly rate limits by location, and Engine checks those rules during search, selection and checkout, so a per diem lodging cap is applied before the room is booked. Engine's [per diem rates lookup](https://engine.com/data/per-diem-rates) shows the FY2027 lodging cap by city, ZIP code or state, month by month. ## Hold hotel stays to the per diem cap Set nightly rate limits by location on Engine, and block or flag rooms above them before the booking goes through. Free to use. [Get started](https://engine.com/sign-up) ## Questions ### Is per diem taxable? Not when the employer pays it under an accountable plan and it stays at or below the federal rate. If it's higher, the amount up to the federal rate goes in box 12 of the W-2 with code L and isn't taxed, and the excess goes in box 1 as wages. ### Do you need receipts for per diem? Not to prove the amount, as long as the allowance is at or below the federal rate. You still have to prove the time, place and business purpose of the trip. Many companies still ask for hotel receipts to check the room against the cap. ### What is the standard per diem rate for 2027? For federal fiscal year 2027, which runs October 1, 2026 through September 30, 2027, the standard rate is $113 a night for lodging and $68 a day for meals and incidentals. About 300 non-standard areas have their own rates. ### What is the high-low per diem method? An IRS alternative to looking up every county. For travel from October 1, 2026, it pays $329 a day in listed high-cost localities and $230 everywhere else in the continental U.S., with $86 and $74 of those amounts treated as meals. ### Do private companies have to use the GSA rates? No. Federal employees have to follow the table, and private companies can set their own. The federal rate still matters because the IRS uses it as the ceiling for tax-free per diem. ## Go deeper - [Is per diem taxable? The IRS rules](https://engine.com/blog/per-diem-taxes) - [Per diem rates 2027 lookup](https://engine.com/data/per-diem-rates) - [Per diem policy template](https://engine.com/templates/per-diem-policy-template) - [Reimbursement](https://engine.com/glossary/reimbursement) ## Sources 1. Internal Revenue Service, "Publication 463 (2025), Travel, Gift, and Car Expenses," https://www.irs.gov/publications/p463, accessed November 2, 2026. 2. Internal Revenue Service, "Notice 2026-60: 2026-2027 Special Per Diem Rates," https://www.irs.gov/pub/irs-drop/n-26-60.pdf, accessed November 2, 2026. 3. U.S. General Services Administration, "Per diem rates," https://www.gsa.gov/travel/plan-a-trip/per-diem-rates, accessed November 2, 2026. 4. U.S. General Services Administration, "M&IE breakdowns," https://www.gsa.gov/travel/per-diem-rates/mie-breakdowns, accessed November 2, 2026. 5. U.S. General Services Administration, "Per diem FAQs," https://www.gsa.gov/travel/per-diem-rates/faqs, accessed November 2, 2026. 6. Engine, "What Is Per Diem? What the 2027 Rate Buys in 89 U.S. Cities," https://engine.com/blog/what-is-per-diem, accessed November 2, 2026. 7. Engine, "Is Per Diem Taxable? What the IRS Rules Say for 2026 to 2027," https://engine.com/blog/per-diem-taxes, accessed November 2, 2026. 8. Engine, "What's the best per diem structure: actual expenses vs flat daily rate?," https://engine.com/faqs/per-diem-structure, accessed November 2, 2026. 9. Engine, "Per Diem Policy Template (Free)," https://engine.com/templates/per-diem-policy-template, accessed November 2, 2026. 10. Engine, "Book Business Travel with Built-In Travel Policies," https://engine.com/corporate-travel-policies, accessed November 2, 2026. 11. Engine, "Company Travel Policy Enforcement," https://engine.com/features/travel-policy-enforcement, accessed November 2, 2026.