IRS updates per diem rules

Tax Hot Topics newsletterThe IRS issued Rev. Proc. 2019-48 to update the rules for using per diem rates to substantiate business expenses incurred while traveling.

The guidance reflects changes made by the Tax Cuts and Jobs Act (TCJA), which suspended miscellaneous itemized deductions for unreimbursed business expenses from calendar years 2018 to 2025. However, certain employees may deduct during the suspension period unreimbursed expenses for business travel away from home using per diem rates for meals and incidental expenses, or incidental expenses only.

The TCJA also modified the rules for entertainment, amusement, or recreation expenses, thereby disallowing a deduction for these expenses that are paid or incurred after Dec. 31, 2017. The revenue procedure clarifies that allowable meal expenses covered by per diem allowances are still deductible provided that food and beverages are purchased separately from entertainment, or the cost of food and beverages is separately stated from the cost of entertainment.

Rev. Proc. 2019-48 is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only that are paid to an employee on or after Nov. 26, 2019, for travel away from home on or after Nov. 26, 2019. For purposes of calculating the amount allowable as a deduction for travel away from home, Rev. Proc. 2019-48 is only effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after Nov. 26, 2019. Notwithstanding the effective dates in Rev. Proc. 2019-48, the TCJA amendments made to the miscellaneous itemized deductions are still effective for taxable years beginning after Dec. 31, 2017, and the deduction disallowance for entertainment expenses is still effective for amounts incurred or paid after Dec. 31, 2017.
Jeff Martin
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107
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